Date Published: 28/07/2020 10:12
Financial planner Emma Baumback looks at why now it is more important than ever to draw up a Lasting Power of Attorney.
We spend a great deal of time planning and protecting ourselves to ensure that our loved ones are looked after if the worst was to happen. This generally starts with arranging a Will so that your wishes are followed and your legacy ends up in the right hands.
Yet as important as it is to have a Will in place, it is equally important to hold a Lasting Power of Attorney.
Social distancing and shielding measures to combat the spread of Covid-19 have fundamentally changed the lives of millions. Across the country, hundreds of thousands of volunteers, family members and neighbours are going above and beyond to help the vulnerable and isolated in our society.
Beyond the daily acts of kindness and support that so many will continue to rely on in this ‘new normal’ Lasting Powers of Attorney will be important documents which allow family members and friends to make important decisions on behalf of those who are unable to do so for themselves.
Why do I need a Lasting Power of Attorney?
A Lasting Power of Attorney is a legal document that comes into effect if you lose mental capacity – either through illness or perhaps through an accident. Using an LPA allows you to give someone you trust the legal authority to make decisions on your behalf.
Let’s put this into context with something we are all familiar with and the most common cause for loss of mental capacity. There are currently around 850,000 people with dementia in the UK. A further 209,600 will develop dementia this year - that’s one person every three minutes.
Despite this, relatives cannot simply access or take control of your money, even if it is to pay for your care.
With the Alzheimer’s Society projecting that more than 1.6 million people in the UK will have dementia by 2040, ensuring an LPA is in place gives you the peace of mind that important decisions will be made by someone you trust.
There are two types of LPA:
Whilst you can choose to have one LPA, we would recommend to set both up at the same time. Your financial LPA can cover managing your accounts, paying bills and collecting your pension, while the health and welfare LPA can be used to manage your daily routine.
You may be thinking “this doesn’t affect us, we’re perfectly well”. This is a common misunderstanding. You can only set up a Lasting Power of Attorney when you have mental capacity.
Once you have lost capacity it’s too late. Management of your money will be handed to the courts to decide on deputies to manage your affairs and there is no guarantee it would be the person you want it to be.
This process usually takes four to six months and is costly. With court fees, medical certificates, assessment fees and annual supervision fees for your deputies, these costs can quickly enter into the thousands.
Yet the financial burden and impact on your loved ones can be far greater. Many people believe that LPAs are only for older people. However, the truth is that an LPA can cover either financial or healthcare decisions, both of which can affect everyone. The loss of capacity can happen to you irrespective of your age, income or assets.
Many of us play a pivotal role in financially supporting our family’s livelihoods and we work hard to save money and invest it for the future. But what if something happened which meant you weren’t unable to make decisions for yourself?
Without this legal document in place, your family cannot deal with your money and it is not possible for us, as your adviser, to accept instructions from them to release pension income or sell from your investments to support your standard of care or importantly, providing continuity within the household.
The key is to act early. The earlier you take out an LPA the better. It may be years or even decades between establishing the LPA and the attorneys taking over. Hopefully, it may never be needed! But the peace of mind is worth its weight in gold.
LPAs are crucial to our financial planning advice and we consistently recommend these to our clients as an integral part of our advice process.
Whilst you are able to register your own LPAs for a cost of £82 each, we would recommend seeking advice and assistance from a qualified legal representative. In the 12 months to April 2020, the Office of Public Guardian rejected nearly 22,000 applications due to errors.
A professional in this field will be able provide you and your attorneys with the required information to understand your duties and responsibilities, ensure that your LPA is valid by submitting it on your behalf and help to reduce the risk of any family disputes in the future.
If you would like to speak to a solicitor about setting up an LPA, please get in touch and we would be happy to refer you to someone who could help.
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