If you become unable to manage your own affairs, perhaps through illness, accident or simply old age, who will manage them for you? And will your family even be able to access your money? At any age or stage of life, it’s worth setting up Lasting Power of Attorney.
If you forget to make a will (and many still haven’t got round to it) then at least you won’t be around to face the mess you leave behind. When someone dies intestate (that is, with no valid will) the result can be a costly administrative nightmare for their loved ones.
But what if circumstances mean you are no longer able to manage your finances yourself? It could be a serious condition like dementia or a stroke, or it could be something as simple as being laid up in hospital for a while. In those situations, other people (such as your spouse) may need to gain access to your savings and other assets. A lot of people assume that their spouse would automatically be granted access to their finances – and it’s a big shock to discover that this is not the case. For this to happen, the spouse (or another trusted person) must already have been granted Lasting Power of Attorney (LPA).
There are two kinds of Power of Attorney – ‘ordinary’ and ‘lasting’. You might grant ordinary power of attorney to someone whom you wanted to manage your finances on your behalf, while you still have mental capacity (but perhaps not the time to do everything yourself). However, ordinary Power of Attorney will lapse as soon as you lose the ability to make decisions for yourself. Therefore it is no use if you suddenly become incapacitated due to illness or injury.
LPA, on the other hand, is specifically designed to allow someone to make decisions on your behalf and access all your finances as necessary. This makes it invaluable if you should become incapacitated. However – and this is the crucial point – you have to set it up in advance. If you don’t have the mental capacity to set it up unaided, it won’t be valid. This is why it is so vital to plan ahead.
Lasting Power of Attorney – your legal life jacket
When you set up LPA, you choose a person – your ‘attorney’ – to act on your behalf and make decisions in your best interests. Your attorney can be any adult whom you trust to make the right decisions for you and to handle the necessary administration, so they may be anyone from a close friend or relative to a professional (such as a solicitor) whom you pay to fulfil the role. If your chosen attorney is not a professional, give them plenty of time to consider before agreeing to the role, as it is a huge responsibility.
You can set up an LPA that takes immediate effect, so that your attorney can manage your finances for you even while you have capacity to do it yourself, and this will continue even should you lose this capacity. Alternatively, you can arrange it so that the LPA only takes effect in the event that you lose the ability to make your own decisions. In this sense it is a kind of ‘legal life jacket’ – you put it on in advance as a precaution, but it only activates when needed.
A purely financial LPA might cover things like managing your home and other properties, investing, paying the bills and paying the mortgage(s). A more far-reaching LPA, for someone who has lost full mental capacity, may also include things like organising your medical care, housing and social activities. This is why it’s so important to make the best possible choice of attorney.
What if I haven’t set up LPA?
If you find you need someone else to manage your finances or make decisions for you, but you don’t have an LPA in place, then things can be much more complicated and costly. An individual (probably a family member or close friend) will have to apply to the Court of Protection on your behalf. This is usually carried out by post rather than in person, so can take some time. The Court will assess your circumstances and if necessary appoint a suitable ‘deputy’ to make decisions on your behalf and access your money as required. The deputy’s role is similar to that of an attorney – unlike an attorney, however, you may not have a say in who it is. This is why it’s so much better to appoint your own attorney while you are still able to.
How to appoint your attorney
Once you have chosen your preferred attorney, and they have agreed to take on the role as and when it becomes necessary, you can make your application. There are forms available via the Office of the Public Guardian (OPG) and you can download these or complete them online. Alternatively, you can engage a solicitor to handle your application.
The registration process will take at least four weeks, so you need to act without delay if you think you are losing mental capacity. If you no longer have mental capacity, you will not be able to set up an LPA (though if you signed it while still mentally capable, your attorney can complete the registration process for you).
There are registration fees for setting up an LPA, with a 50 per cent discount for those on low incomes. People in receipt of certain benefits can set up an LPA for free.
Even more important than a will?
You have heard or read a great many people urging you to make a will – and you may have taken their advice already. But far fewer people know about Lasting Power of Attorney, even though it’s arguably as important as a will and perhaps even more so. For instance, if you are a family’s main earner and most of the savings are in your name, your family may find it impossible to access vital funds at a crucial time, should you become incapacitated (at least until a deputy can be appointed). By contrast, if you were to die intestate, then your spouse would inherit a large proportion (if not all) of your assets automatically.
Before setting up Lasting Power of Attorney, it can help a great deal to talk to both a financial adviser and a solicitor. You can find both near you using our smart search.