How can a Lasting Power of Attorney help me?
Imagine a situation where, either suddenly or gradually, you lose your ability to make decisions. This situation is not as rare as you think. It could be caused by many things including, a stroke, an accident, Alzheimer’s or dementia.
If you found yourself in this situation who would deal with your bank account and investments, who would be able to make decisions for you about finances or medical treatment? The answer is nobody, in the short term, once you lose the ability to make decisions for yourself it is too late!
Medical treatment will be given but it may not be what you would choose, whilst it is often financial issues that cause the biggest problems. If, for example, a mortgage or utility bills are in your sole name and come out of your sole account, your spouse or partner cannot access the accounts or speak with the companies to rearrange payments. This can cause debts to build up as well as stress.
What is a Lasting Power of Attorney?
A lasting power of attorney (LPA) is a legal document which allows the person or people you choose to assist you or ultimately take over decision making on your behalf. They are known as your attorney. You can have more than one attorney and they can be authorised to act independently or together. They must act in your best interests.
There are two types of LPA to consider and they have very different purposes:
A Property and Affairs LPA allows your chosen attorney to assist you in making decisions regarding your property and finances. If it becomes necessary, they can take over dealing with your finances on a day to day basis and even sell your property on your behalf.
A Health and Welfare LPA allows your chosen attorney to make decisions about where you live and the type of care you may need. You even have the option to allow your attorney to make decisions about whether you receive life sustaining treatment if you lacked capacity to make that decision yourself.
Why do you need an LPA?
It allows you to make, in advance, the important decision of who you would want to act on your behalf if the circumstances arose.
Whilst you have mental capacity you can change your mind. You can decide to change your appointed attorney easily by simply revoking the document and creating a new one.
What would happen to your finances if you didn’t have one?
Without a power of attorney in place the only option to access and look after your finances is to seek help through the Court of Protection. This can easily take at least 6 months. The costs of making the initial application usually amount to over £2000 plus the ongoing annual costs, roughly four times the costs of a lasting power of attorney.
What would happen if you were not able to give instructions to your adviser?
Your adviser may be unable to change your portfolio. The person looking after your investments makes decisions based on your instructions and your risk profile. Over time your instructions and risk profile may change.
On the approach to retirement it is likely to become more cautious to ensure your nest egg is there to look after you in later life. Unfortunately you may be unable to change your risk profile if you lose your ability to communicate or make decisions.
Who would give instructions to your adviser if you couldn’t?
Unfortunately, once you lose the ability to make decisions for yourself it is too late! Banks, building societies and your IFA will only communicate with the account holder.
What if you hold joint investments and accounts?
Once the bank is advised that a joint account holder has lost capacity it will normally freeze the account completely or it may continue to allow direct debits, until either a lasting power of attorney or a Deputyship Order is registered with them.
Who should get an LPA?
Everyone but particularly the elderly. Once registered with the Office of the Public Guardian (OPG) a Property and Affairs LPA can be used in a variety of circumstances, not simply because a person has lost mental capacity. For example, you become less mobile or need to enter care accommodation, your signature has become shaky and is questioned by your bank or you need to be in hospital for a period of time.
The LPA cannot be used until it is registered with the OPG. You have control as to when it comes into use. Having a registered LPA allows affairs to be dealt with immediately and without worry.
What can you do to protect yourself?
While you still have your capacity you can appoint an attorney to act for you. A lasting power of attorney for Property and Affairs enables someone that you appoint to help with your finances if you can no longer make decisions or if you can – whichever you choose.
When should you make a Lasting Power of Attorney?
This is a bit like saying when should I insure my house? Of course the answer is BEFORE anything happens. If you do not make it whilst you are in good health it is likely to be too late. Many people are fine one day and suffer an accident or a stroke the next so the most important thing is to act now.
Act now! You wouldn’t insure your property AFTER it burnt down!
This article is intended as guideline information, not legal advice. You should always seek legal advice from a specialist solicitor before taking any action.