If you weren’t able to manage your own finances, it’s likely that you’d want a trusted person to look after them on your behalf. A Lasting Power of Attorney (LPA) enables you to do just that.
However, research by Lloyds Bank reveals that 80% of over-55s don’t have an LPA in place. Furthermore, it shows that nearly a third (29%) of people believe a Power of Attorney can be put in place after someone loses mental capacity.
In reality, if mental capacity is lost before a POA is established, it’s typically too late to then create one.
You may remember that this was an issue highlighted by television presenter Kate Garraway during the Covid pandemic. She spoke publicly about the financial problems she experienced as there was no LPA in place when her husband, Derek Draper, was incapacitated by Covid. Because of this, she was unable to deal with his financial affairs.
Read on to discover five important reasons why you probably need to create an LPA as soon as possible if you don’t already have one. Before you do though, let’s look at what an LPA is and how it works.
An LPA allows someone you trust to look after your affairs
An LPA allows you to nominate someone you trust to act as your “attorney”, which means they can make decisions on your behalf if you lose mental capacity due to an impairment.
There are two types of LPA, which are:
- Financial LPA – this allows your attorney to deal with your finances, which may include paying your mortgage, rent or household bills, managing investments and savings, or dealing with your state benefits and insurance policies. Remember that an attorney can also make these decisions for you if you still have mental capacity but do not want to.
- Health and care LPA – this covers your health and care, allowing your attorney to make decisions about your medical care and what treatment you receive. The health and care LPA can only be used when you lose mental capacity.
For the purposes of this blog, we will only look at the benefits of a financial LPA, five of which we will consider now.
1. You future-proof your finances no matter what happens
Without an LPA, no one will be able to deal with your bank or credit card accounts, mortgage or rental payments, investments or savings if you can’t. As a result, you could fall into arrears which could put your home at risk or leave stocks and shares in funds that are underperforming.
Appointing someone to deal with these issues means that you have future-proofed your affairs while you still have the mental capacity to do so. You can also apply restrictions on the types of decisions your attorney can make if you want to.
2. It’s easier than you may think
Creating an LPA is relatively straightforward. You can apply online or request the relevant forms and application pack from the government website. If you do intend to create an LPA using these methods, taking professional advice from your solicitor or financial adviser could be a shrewd move.
The LPA must be signed by someone you trust, or you could use a professional attorney such as a solicitor. They confirm that they understand the contents of the LPA and that no one has put you under pressure to sign.
Once you have completed the forms, the LPA must be registered with the Office of the Public Guardian before it can be used. A professional legal adviser or financial planner can help you with this.
3. You do not have to give up control of your finances
A common myth with LPAs is that you give up control of your finances as soon as it’s created. Typically, this is not the case, as you maintain control of your affairs for as long as you have mental capacity.
4. Creating an LPA need not cost a lot
While you might assume that creating an LPA is expensive if you use a legal professional, this need not be the case, especially if you enlist the help of your financial planner.
That said, there are organisations that may want to charge substantial fees to create an LPA. Always speak to your financial planner before agreeing to use an organisation, as the planner can confirm whether the cost is reasonable or not.
5. Your affairs are looked after without delay
With a registered LPA in place, if you become incapacitated or lose mental capacity, your attorney can look after your affairs straight away. Without an LPA, any wishes that you’ve previously expressed will not be legally recognised, meaning that loved ones will probably not be able to deal with your financial affairs.
If you do not have an LPA, those closest to you will have to pick someone they feel is the most appropriate person to act on your behalf. The appointed person would then need to apply to the Court of Protection to become your Deputy.
This could result in someone looking after your affairs that you would not necessarily have chosen yourself – and could cost significantly more than creating an LPA. Furthermore, going through the Court of Protection is likely to take longer, which could cause financial problems in the short term.
Get in touch
If you would like to discuss LPAs or ensuring your wealth is protected if anything happens to you, please email us on admin@stonegatewealth.co.uk or call 01785 876222.
Please note
This article is for information only. Please do not take action that is based on anything you read in this article until you have sought professional advice.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
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