Whilst some of us never quite get around to preparing our Will, most of us at least contemplate the task. Part of the rationale behind this is to help our family avoid possible disagreement of what Mum or Dad wanted or what was promised so many years ago. Wills have become part and parcel of our financial ‘to do’ list.
Wills have one significant drawback; they cannot be used during our lifetime. Something else is needed. A lasting power of attorney (LPA) is a legal document that enables you to appoint someone to make decisions about your welfare, money or property, either now or in the future, during your lifetime.
Why should I make a lasting power of attorney?
With the improvements in medical science more of us are living longer, but often in poor health. Accordingly it is becoming increasingly common for one or more of us to need some form of care. The majority of this care will be for much later in life, but accidents and impairments can happen at any age and so time spent now can help remove this uncertainty.
To avoid this uncertainty and to allow greater control over who looks after your future financial affairs and wellbeing we have the option of a lasting power of attorney (LPA). Since October 2007, an LPA is recognised by the courts as the mechanism by which we can formally appoint our attorney (s) and set out what powers we have given to them
What happens when we lose mental capacity?
In England, Wales, Scotland and Northern Ireland, when an individual loses their capacity, they automatically lose control over decisions that involve their finances and wellbeing. There are specific rules in place for each jurisdiction, but broadly whilst many might think that a spouse or family member automatically gains control of your affairs, this is not the case.
Who has the authority to look after your affairs if there is no lasting power of attorney in place?
In England and Wales, the Court of Protection will look to appoint a Deputy if there is no prior instruction in place. A family member can apply to the court to be a Deputy, and if acceptable to the court, the court will lay out the actions the Deputy can take and what records need to be provided to the court on a regular basis. Scotland and Northern Ireland have a similar process. The main handicaps to relying on the courts are costs and the paperwork involved.
When does a lasting power of attorney take effect?
A lasting power of attorney cannot ‘work’ until it is registered by the Office of Public Guardian (OPG) and this must occur whilst you still have the mental capacity.
Registration in itself does not mean that the individual in question has lost capacity. They can carry on making decisions in the usual way, despite registration, until such time as capacity is lost.
How does a lasting power of attorney work?
There are two types of lasting power of attorney (LPA): ‘Property & Financial Affairs’ and ‘Health & Welfare’. The former can set out the powers you give to your attorney over your property, the control of your investments, bank accounts and can include claiming benefits. The second gives your attorney power over medical treatment, care, diet and dress. It is possible to have one or both elements for an effective LPA. Please remember you must register your LPA otherwise your attorneys will not be able to act.
Who can I choose as an attorney?
There are some restrictions, but generally most people over 18 can be an attorney (you don’t need to live in the UK or be a British citizen). When choosing your attorney or attorneys it is important to choose someone you trust implicitly to look after your affairs. This might be one or more members of your family or a trusted friend or professional adviser. If you appoint more than one attorney, attorneys can be appointed ‘jointly’ (in which case they must do everything together) or ‘jointly and severally’ (in which case they can act together or individually) in relation to all issues.
What are the responsibilities of the attorney?
The attorney’s powers will depend upon the type of lasting power of attorney (LPA) that has been set up and whether any restrictions on their power have been included in the document.
The attorney has numerous duties. In particular, an attorney must:
- make decisions that are in your best interests;
- only make decisions that they are enabled to by the terms of the LPA;
- not delegate powers they have been given to others , unless authorised to do so; and
- maintain your confidentiality.
Are there any restrictions placed on the attorney?
There are some things that the attorney cannot do:
- sign a will on your behalf;
- make gifts on your behalf except in limited circumstances;
- consent to your marriage or divorce.
Do the pension freedoms increase the need for a lasting power of attorney?
Registering a lasting power of attorney (LPA) has become even more important since the pension reforms. Thousands of people drawing on their pension pot are now making complex decisions on their pension into old age, when the risk of developing a sudden illness or condition such as dementia increases.
Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities.
Can I apply for a lasting power of attorney?
It is possible for you to arrange a lasting power of attorney (LPA) yourself and it only costs £82 to register one LPA (if you use both LPA elements, the cost of registration rises to £164). Please note some people are entitled to a reduction in fees or exemption.
However, for complex arrangements such as managing pension investments, we recommend speaking to a suitably qualified financial adviser and/or a legal professional to help avoid potential mistakes or confusion. Please remember to ask about fees when seeking professional help.
How often should I review my lasting power of attorney?
It is important to regularly review an existing lasting power of attorney (LPA). Life can change and what was important several years ago might not be an issue now. This might mean replacing an existing LPA with a new one.
Is there anything else I need to consider?
There are spaces within the draft lasting power of attorney (LPA) document for an individual to write personal instructions. For example, if you like to make regular gifts to charity or family it is worth mentioning this in the LPA. If the attorney feels there is financial scope to continue such gifts, the LPA will help guide them. Similarly if you are currently using a discretionary investment service, you might want to mention this in the LPA. If an LPA does not specifically mention this, your attorney will have to personally agree all investment decisions. This might be something you would like to avoid.
Whatever powers or limitations you include within your LPA, your attorney must place your care and wellbeing first. If your instruction would prevent this from happening, the attorney should not follow your instruction, but use their best judgement. For example if you instruct your attorney to make a regular gift the attorney would have the ability not to make the gift if the attorney felt by following your instruction he/she would be putting your financial wellbeing at risk.
Please remember that your attorney’s ability to act ceases if they divorce you (or ends your civil partnership), they become bankrupt (or subject to a debt relief order), is removed by the Court of Protection (for whatever reason) or you or the attorney dies.
Where can I find further information?
The following are two useful sites for help and assistance:
» If you have any questions about the above, please do not hesitate to contact us.