Setting up a Lasting Power of Attorney is an important step you should take to make sure your loved ones can make the important decisions about your health and your financial wealth on your behalf, should you become incapacitated through ill health or accident.
We live in an era when people are likely to live for many more years than previous generations would have expected. But with more people living longer, it has become increasingly commonplace that many will reach a point in their life when they are no longer able to make decisions for themselves.
Sadly, this is only likely to become more commonplace. According to Alzheimer’s Research UK, one million people in the UK will be diagnosed as living with dementia by 2025, and this will increase to two million by 2050. A person’s risk of developing dementia rises from one in 14 over the age of 65, to one in six over the age of 80.
When the person who has been in charge of the family finances all their life is no longer capable, it can become increasingly difficult for their family to ensure that the right decisions are being taken. So, as we all get older, it becomes even more important to make sure we get our affairs in order, and one of the best ways to do this is to arrange a Lasting Power of Attorney (LPA).
An LPA is a legal document that lets you appoint someone you trust to make decisions on your behalf, should you become unable to make those decisions for yourself in the future. There are two different types of LPA:
You can choose to set up one or both types of LPA, and you can nominate the same person or elect to have different attorneys for each. However, just because you’ve set up an LPA, it doesn’t mean that you instantly lose control of the decisions that affect you. You can be very specific on the LPA about when the attorney acting on your behalf is able to take control. All LPAs must be registered at the Office of the Public Guardian, which is the government body responsible for the registration of LPAs before they can be used.
You can nominate anyone to be your attorney, provided they are 18 years old or older. However, for a Property & Affairs LPA, your attorney cannot be bankrupt or the subject of a debt relief order. Whoever you choose, you should bear in mind that they will need to be someone that you trust to make decisions for you, and will be able to act responsibly and in your best interests. It’s always worth having a conversation with the person you’re considering to nominate as your attorney, so you can explain your wishes and your preferences, along with what you expect of them.
Having an LPA in place will make things easier for you and your family should you start to become incapacitated. For example:
If you lose mental capacity and don’t have an LPA arranged, your family will have to apply to the Court of Protection to become your appointed ‘deputy’. The Court of Protection will make an assessment and appoint someone that it believes is a suitable appointee. This deputy will then make financial decisions on your behalf. It’s worth recognising that the person the Court appoints may not be the person you would have intended. It’s also worth noting that the process of appointing a deputy can take considerable time to resolve.
For obvious reasons, when it comes to managing someone’s investments, the subject of exactly what an attorney is legally allowed to do becomes more complicated. Many people who have been placed into the role of attorney may not feel qualified to make strategic investment decisions, and feel this type of responsibility is best left to professionals with the experience and qualifications to make the right decisions.
Therefore, subject to the donor’s consent, it is important that any LPA document contains specific wording that provides express permission to delegate investment management decisions to an existing or new discretionary investment manager. If the document does not provide this permission, Attorneys will need to take decisions themselves following advice from an investment professional or they will need to apply to the Court of Protection to obtain retrospective consent before they instruct any investment decisions.
Quite often, it is the parent in need of care who holds all the family assets in their name. We have been made aware of several cases where family members have found it difficult to make long-term care provisions for a parent who was no longer capable of making their own decisions.
In these instances where no LPA has been put in place, family members have spent considerable time and money trying to take control of the parent’s assets to pay for their care, while experiencing lengthy delays trying to get a determination from the Office of the Public Guardian. These cases have convinced us that families should really start talking about the importance of LPAs long before they think an LPA will ever be needed. We can help to ensure that any LPA drawn up contains the necessary wording to delegate investment decision-making to those best placed to manage the investments.
As with writing a will, the most important aspect of an LPA is that it gives you the power to make a decision when you choose to, rather than leaving it too late to have your say. Creating an LPA at the same time as you write your will could potentially save you and your family a great deal of money and distress further down the line.
If you are interested in discussing arranging an LPA with one of our experienced financial planners, please get in touch here.
This content is for information purposes only. It does not constitute investment advice or financial advice.