A key component of future planning
As we age or face unforeseen health challenges, managing finances and making healthcare decisions can become increasingly difficult. Have you ever considered the repercussions of losing mental capacity and being unable to make your own financial and welfare decisions?
This is where a Lasting Power of Attorney (LPA) becomes vital. An LPA is a legal document distinct from your Will, allowing you to appoint a trusted person (the attorney) to make decisions on your behalf, providing peace of mind for the future.
Many people establish an LPA alongside their Will as part of a comprehensive plan for their future. Knowing that a trusted individual can make decisions on your behalf if necessary is reassuring and ensures that your wishes are respected.
The role of an LPA during your lifetime
With an LPA, you can rest assured that someone you trust will manage your affairs if you cannot do so yourself due to illness, old age or an accident. Your appointed attorney will handle your finances and property and make decisions about your health and welfare. The LPA can include specific instructions and general preferences for your attorney to consider, ensuring your unique wishes are fulfilled.
Understanding legal capacity and its importance
To create a Lasting Power of Attorney, you must possess the necessary legal capacity, meaning you understand the nature and consequences of the document. You must have this capacity to establish an LPA, and anyone can do it for you. The next of kin does not automatically have the legal authority to manage a spouse’s affairs without an LPA, leading to lengthy and expensive decision-making processes.
In England and Wales, there are two types of LPAs:
1. Lasting Power of Attorney for Health and Welfare
This type of LPA covers decisions related to your living arrangements, medical care, dietary choices and social activities. Additionally, you can grant your attorney permission to make life-saving treatment decisions. This LPA only becomes effective if you lose mental capacity.
2. Lasting Power of Attorney for Property and Financial Affairs
This LPA involves decisions concerning buying and selling property, mortgage payments, investment management and bill payments. It can be restricted to use only if you lose mental capacity or be applied more broadly, such as during illness or mobility issues.
Ensuring legal authority over your affairs
Without an LPA, no one has the legal authority to manage your affairs, such as accessing bank accounts or selling property on your behalf. Instead, someone must apply to the Court of Protection to gain this authority, where the court appoints a ‘Deputy’ to manage your affairs—a process more complex and costly than appointing an attorney through an LPA. Therefore, obtaining professional advice and establishing an LPA is crucial to ensure that a specific person has legal authority over your affairs, simplifying the process and reducing costs.
In conclusion, it might be too late if a severe injury, accident or illness strikes before an LPA is established. Regardless of your perspective, establishing an LPA is one of the most effective ways to safeguard yourself if you lose mental or physical capacity. By putting it in place sooner rather than later, you ensure peace of mind and proper management of your affairs, securing your future and that of your loved ones.
THIS GUIDE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
TRUSTS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
INHERITANCE TAX/ESTATE PLANNING ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
TRUSTS AND INHERITANCE TAX/ESTATE PLANNING ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
THE VALUE OF INVESTMENTS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED.
EQUITY RELEASE WILL REDUCE THE VALUE OF YOUR ESTATE AND CAN AFFECT YOUR ELIGIBILITY FOR MEANS-TESTED BENEFITS.
INHERITANCE TAX/ESTATE PLANNING AND WILL WRITING ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
WILL WRITING AND POWERS OF ATTORNEY ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.