FINANCIAL ADVICE CENTRE NEWS
Your Summer Newsletter 2021
Your Adviser Discusses
Planning for the unexpected - the importance of assigning Lasting Power of Attorney.
The last 12 months have been a period of disruption for all of us. As we now pass the anniversary of the beginning of the UK’s first lockdown we have some time and space to begin to reflect how far we have come and what we have learned.
Having recently read of the difficulties faced by television presenter Kate Garraway and her husband Derek it really drives this point home. In all things financial, it is essential that you plan for the unexpected. Kate found herself unable to work while at the same time caring for her partner but was also then thrust into an parallel legal rabbit hole. She was unable to access any of her husband’s bank accounts, credit cards or even their joint savings. This has also meant she has been unable to refinance their joint mortgage or manage any of the ongoing expenses or policies in his name.
All this could have been avoided had the couple appointed one another as Lasting Power of Attorney (LPA). If you are married or in a civil partnership, you may have assumed that your partner or spouse would automatically be able to deal with your bank account and pensions, and make decisions about your healthcare, if you lose the ability to do so. This is not the case. Without an LPA, they will not have the authority.
It is a common misconception that Wills and LPAs are only relevant for the elderly. They are equally as important if the worst should happen and you are physically incapacitated. If injured in an accident or as Kate and her husband have experienced – suffering the unexpected and debilitating effects of long COVID, your close family cannot manage your affairs without legal authority.
If you do not have a Property and Financial Affairs LPA and you lose capacity, it may become necessary for an application to be made to the Court of Protection for an order appointing someone else (a Deputy) to act on your behalf. This can be expensive and time consuming, and you can avoid this by having an LPA in place. With your instruction, a Property and Financial Affairs attorney can also act for you if you are, for example, out of the country and need them to sort out bank accounts or other financial matters in your absence.
Below we define the key terms often used around Wills and LPAs.
Lasting Power of Attorney
A Lasting Power of Attorney is a legal document that states a person or persons you name to act on your behalf (your attorney) in regards to handling financial and business transactions. An LPA gives someone the legal power to make financial decisions on your behalf if you become mentally or physically incompetent. There are two types of Power of Attorney one in respect of property and financial affairs and one in respect of health and welfare decisions.
Property and Financial Affairs LPAs
This type of LPA will allow your appointed person to deal with your property and financial affairs, either with your instruction or in the event of your mental incapacity. In order for your attorney to use this power on your behalf the LPA must be registered with the Office of the Public Guardian (OPG).
You are able to restrict the powers you give to your attorney(s). You can also provide them with guidance. In both cases you must ensure that the provisions are reasonable and practical, otherwise the LPA may be rejected by the OPG.
Examples of the types of decisions that can be made using an unrestricted property and financial affairs LPA are:
- Buying or selling property
- Operating your bank accounts, investments and savings
- Receiving income and inheritance on your behalf
- Paying your bills for you
Health and Welfare LPAs
This type of LPA will allow your attorney(s) to make health care and welfare decisions on your behalf. This LPA, unlike the property and financial affairs LPA, can only be used if you lack mental capacity to make the decision yourself. This LPA also needs to be registered with the OPG before it can be used.
Your attorney(s) will have authority to make decisions for you on all matters relating to your personal health and welfare needs. This may include:
- Your healthcare and medical treatments
- Where you live
- Day to day decisions about your personal welfare, such as your diet, dress or daily routine.
You also have the option to allow your attorney to give or refuse consent to life sustaining treatment on your behalf. It is important to be aware of the effect that this has on any advance decision that you have in place. If you allow your attorney(s) to make life sustaining treatment decisions for you, they will overrule your advance decision. If you choose not to give your attorney(s) this power, your advance decision will still stand.
Just because you give the trusted person power of attorney over your health, it does not mean they will automatically gain control over your financial affairs and vice versa. If you require the same individual to have power of attorney over both aspects of your care, then you will have to fill out the two forms separately.
Enduring Power of Attorney
An enduring power of attorney (EPA) is a document that used to be used to appoint someone to help manage your property, money and financial affairs. The EPA was replaced with the property and financial affairs Lasting Power of Attorney in October 2007.
If you made an EPA that was signed and witnessed before October 2007 you can either:
- continue to use it
- cancel it and set up a property and financial affairs LPA
Living Wills and a Last Will & Testament
A living will deals with your health wishes while still living. A will states what you wish to have happen to your assets when you die. It’s not one or the other, you should have both.
When a person dies without leaving a valid will, their property (the estate) must be shared out according to certain rules. These are called the rules of intestacy. A person who dies without leaving a will is called an intestate person.
Only married or civil partners and some other close relatives can inherit under the rules of intestacy.
There is a strict order of precedence which is often not what the deceased person would have intended.
If someone makes a will but it is not legally valid, the rules of intestacy decide how the estate will be shared out, not the wishes expressed in the will.
These four estate planning documents are all important and it’s a smart move to give consideration to them all.
If you would like to discuss this further, we can help, please reach out and we can point you in the right direction.
Our thanks to Clare Burden, Solicitor, Whatley Weston & Fox Solicitors for contribution to this article.