Giving someone you trust authority to help you make decisions
As an individual when our health declines, managing financial affairs and making vital decisions about our healthcare can become increasingly challenging; this is where a Lasting Power of Attorney (LPA) comes into play.
An LPA is a legal document that empowers a selected person, referred to as the attorney, to assist in decision-making or make decisions on behalf of the individual, known as the donor. While an LPA is entirely distinct from your Will, it’s common for individuals to establish both simultaneously as part of future planning. Knowing that a trusted person will make decisions on your behalf if you become too unwell provides a sense of reassurance.
Assurance during your lifetime
With an LPA in place, you gain peace of mind knowing there’s someone trustworthy to manage your affairs if, unfortunately, you cannot do so due to illness, old age, or an accident. An LPA allows your attorney to handle your finances and property and make crucial decisions about your health and welfare. It can incorporate binding instructions and general preferences for your attorney. Your LPA should reflect your specific wishes, ensuring that what matters most to you will be taken care of.
Requirement for legal capacity
You can only establish an LPA while you have the required legal capacity, meaning you understand the implications and effects of the document. Beyond this point, you cannot create an LPA, nor can anyone do it on your behalf.
It’s worth noting that many people are unaware that their next of kin does not automatically have the legal right to manage their spouse’s affairs without an LPA. As a result, making decisions on their behalf can become a prolonged and considerably more costly process.
Types of Lasting Power of Attorney
In England and Wales, there are two types of LPAs: Health and Welfare, and Property and Financial Affairs.
The LPA for Health and Welfare covers decisions regarding your living arrangements, medical care, diet, social interactions, and participation in social activities. You can also grant special permission to your attorney to make life-saving treatment decisions.
The LPA for Property and Financial Affairs covers decisions related to buying and selling property, mortgage payments, investments, bill payments, and property repairs.
Taking control of your affairs
Without an LPA in place, no one with the legal authority can manage your affairs – accessing your bank accounts, handling your investments or selling your property on your behalf. It’s a common misconception that spouses, partners, or children can step in, but the reality is far from it.
Court of Protection’s role
In such situations, someone seeking legal authority over your affairs must apply to the Court of Protection. The court then decides who will manage your affairs, appointing them as your ‘Deputy’. This appointment process is considerably more complex and expensive than being named an attorney under an LPA.
Opting for a Lasting Power of Attorney
Professional advice about setting up an LPA should be sought to ensure peace of mind and make matters simpler and less costly for your chosen representative.
Health and Welfare Lasting Power of Attorney
Making decisions on your behalf
A Health and Welfare LPA allows you to name attorneys to make decisions about your healthcare, treatments, and living arrangements should you lose the ability to decide for yourself. Unlike the Property and Financial Affairs LPA, this document only becomes effective if you lack the mental capacity to make decisions.
Communicating your wishes
If you’re unable to express your preferences, you might find yourself in a care home when you’d have preferred to stay in your own house. You could also receive medical treatments or be placed in a nursing home that you would have rejected given the chance; this is where your attorney, appointed by the LPA, can advocate for your wishes.
Property and Financial Affairs Lasting Power of Attorney
Managing your assets
A Property and Financial Affairs LPA enables you to name attorneys to manage all your property and financial assets in England and Wales. The LPA can be restricted to use only in the event of mental incapacity, or it can be used more broadly, such as if you suffer from illness, have mobility issues, or if you spend time overseas.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS
PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAXATION AND TRUST ADVICE. TRUSTS ARE A HIGHLY COMPLEX AREA OF FINANCIAL PLANNING.
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SPECIFIC ADVICE.
PROFESSIONAL FINANCIAL ADVICE SHOULD BE OBTAINED BEFORE TAKING ANY ACTION.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR MORTGAGE IS SECURED ON YOUR HOME, WHICH YOU COULD LOSE IF YOU DO NOT KEEP UP YOUR MORTGAGE PAYMENTS.
EQUITY RELEASE MAY INVOLVE A HOME REVERSION PLAN OR LIFETIME MORTGAGE WHICH IS SECURED AGAINST YOUR PROPERTY. TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION.
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