Lasting powers of attorney (LPAs) are often overlooked in the estate planning process. Some think they are unnecessary; however, there are several reasons why they are vital and why you should look to include them as part of your estate plan.
What Is an LPA?
Lasting powers of attorney allow you, the donor, to choose an attorney to manage your financial or healthcare affairs if you ever lose mental capacity. You can choose more than one attorney; however, you should make sure whoever you choose is trustworthy.
Mental capacity is defined as “the ability to make decisions when they need to be made and understand both the decision and potential outcomes”. Daily decision-making for most people is not a problem, but for others, their ability to do so can vary. A condition like dementia does not automatically mean that someone lacks mental capacity and needs an attorney, but it can be much easier if one is in place.
While some may think the responsibility of being an attorney automatically falls to their next of kin, without an LPA in place, nobody will be in charge, and your loved ones will have to apply for a deputyship order to handle your affairs.
There are two types of LPAs to consider:
- LPA for financial decisions – you can decide whether this LPA comes into effect when you have lost mental capacity or while you still have it but want someone else to act on your behalf. It covers financial decisions such as paying bills, buying or selling property, and investing. You can also restrict the decisions your attorneys can make for you. When setting up this LPA, your attorney must ensure that your money is separate from their money, and you can ask for details about what is spent.
- LPA for health and care decisions – this LPA covers decisions such as where you should live, what you should eat, and what medical care you receive. You can also give your attorney permission to make life-saving treatment decisions. Unlike an LPA for financial decisions, it only comes into effect once you have lost capacity.
You can have both LPAs simultaneously, which can be highly beneficial if you lose capacity. Establishing an LPA is a simple process. Anyone can apply for one as long as they are over eighteen and have full mental capacity. It is not advisable for someone to apply as they start to lose capacity; this could be considered too late.
The Importance of an LPA
Around 40% of the UK’s adult population has written a Will, but only 1% has an LPA; however, anyone can lose mental capacity at any time. Around one in three people will develop dementia, and brain injuries and accidents are also common.
An LPA provides peace of mind for the future, allowing you to rest easy knowing that someone you trust will manage your estate. Without one in place, you do not have a say in who handles your affairs – instead, the courts will appoint a deputy to make decisions on your behalf. In this instance, you could find that it may be someone you did not want to be involved with your affairs, and it can also be costly. An LPA costs around £82 to register, but a deputyship order costs £371 just for an application. Having an LPA in place takes a significant burden off your loved one’s shoulders.
One of the major benefits of establishing an LPA early is that you can decide when it comes into effect. You can choose whether your financial LPA starts immediately, so your trusted attorney can begin managing your finances on your behalf, or you may want to retain control until you lose capacity.
Choosing Your Attorneys
The biggest question when establishing an LPA is who your attorneys should be. As long as they are over eighteen, have full mental capacity, and are not bankrupt, you can choose anyone you like. You can choose to employ a professional solicitor to be your attorney, but this is unnecessary and can be expensive.
Opting for more than one attorney is usually a good idea as if one person is unavailable, the other can act for you. However, it would help if you decided whether they will make decisions jointly, or jointly and severally:
- Jointly – all attorneys must agree to a decision before taking action.
- Jointly and severally – attorneys can make decisions together and apart.
You can also nominate people to replace your existing choices for attorneys if they are unavailable or cannot act on your behalf anymore.
When setting up an LPA, a big worry can be how much control attorneys have over finances. Appointing a trustworthy person is essential for peace of mind, and there are things attorneys cannot do with your finances and money, such as:
- Make big gifts of money
- Combine their finances with yours
- Pay themselves a fee (unless given explicit permission)
These restrictions help to protect your money and provide you peace of mind; however, there is the potential for LPAs to be abused. If you are worried about how your or someone else’s LPA is being used, contact the Office of the Public Guardian with your concerns.
No one likes to think they will lose mental capacity in the future; however, lasting powers of attorney provide peace of mind for you and your loved ones, and you can rest easy knowing a trustworthy individual will take care of your affairs.
Start your LPA today with The Planning Bee. With fast, friendly advice and bespoke estate planning solutions, we can advise you on how best to set up your LPA and put your mind at ease for the future.