There’s a good chance that when you hear the expression “Power of Attorney”, you will automatically think of elderly people.
To be fair, that’s an understandable reaction, as such arrangements tend to be associated with older relatives, especially around issues such as care, and managing their financial arrangements when they are no longer able to.
However, it really is just as important for younger people to have a Lasting Power of Attorney (LPA) in place too.
An LPA is an official legal document. You can use it to give full authority to someone you trust to manage your financial and health issues for you at such a time when you are not in a position to be able to.
There are two different types of LPA:
- A Health and Welfare LPA, giving someone authority to make medical and care decisions on your behalf.
- A Property and Financial Affairs LPA that covers managing all your financial arrangements, including paying bills, claiming any benefits due to you, and looking after your assets.
In view of the implications of not having an LPA in place, we would strongly recommend that you consider setting up both kinds. Doing so will give both you and your family enormous peace of mind and once they are in place, it’s one less thing for you to worry about.
As well as that valuable peace of mind, here are five more important reasons why it’s sensible to see this as one of your financial planning priorities.
1. It’s impossible to predict the future
It’s a sad fact of life that accidents can happen, and, by definition, you can’t predict if and when such events will occur.
This means that, regardless of whatever personal precautions you take, an accident could easily result in you incurring serious injuries that could make it impossible for you to manage your own affairs.
Having an LPA in place will mean that your loved ones will be able to make important decisions on your behalf. Yet, a survey in the Independent found that less than half of married couples have an LPA.
As well as physical accidents, many serious and incapacitating illnesses can also affect you without warning, and without any regard to your age or health.
For example, a report from the Stroke Association confirms that 100,000 people in the UK have a stroke each year, and the age range of those affected is wider than you’d think.
Ultimately, having an LPA gives you reassurance that no matter what may happen, you can ensure your financial wellbeing will be looked after.
2. Setting up an LPA is easier than you might think
Although it is a formal legal document, setting up an LPA is relatively straightforward.
On the government website you can both download the relevant forms to complete by hand and apply online.
However, before you do this, we would recommend you get professional advice from your solicitor or an experienced financial planner.
They will be able to confirm your requirements and talk you through the best way to set up your LPA in accordance with your wishes and needs.
Once you have completed your LPA, you will need to register it with the Office of the Public Guardian. It’s worth noting that the government website currently cites a timescale of up to 20 weeks to register your LPA if there are no mistakes in the application.
3. It gives you the power to choose who you want to manage your affairs
You can choose one or more people, known as your “attorneys”, to act on your behalf and manage your affairs if you’re unable.
Knowing that you have someone you trust to look after things in the way you’d wish can give you invaluable peace of mind. It also means you can assign someone with appropriate experience or expertise.
You can also write specific restrictions into your LPA to make it clear what your attorney can and can’t do. For instance, you may wish to prevent your attorney from making decisions regarding your investments or any other of your assets.
By naming an attorney through an LPA, you can choose someone you trust to act on your behalf. It means you have control over who may make decisions for you.
If you do not have an LPA in place, your family will have to apply to the Court of Protection in the event that you are no longer able to manage your affairs. It will then be down to the court to decide who is most suitable to make decisions for you, and it may not be the person you would have personally chosen.
One other point to consider is that an LPA will allow someone else to manage your financial affairs even if you still have the full mental capacity required to do so. For example, as you get older you may find that you don’t want the hassle of managing your finances. So, by having one in place, you can hand over control to someone else to act on your behalf, even for just a limited period.
This is not the case for a health and wellbeing LPA. If you have capacity, no one can make decisions over your health on your behalf.
4. An LPA can help avoid periods when no one is managing your finances
With an LPA in place, your loved ones can step in and manage your affairs immediately.
Even if you’re married or in a civil partnership, your spouse isn’t necessarily able to deal with your financial affairs if you lose the ability to do so yourself.
Furthermore, if you have any financial arrangements in your sole name, such as a bank account or savings and investments, they will not have the authority to manage these without an LPA.
As well as potentially leaving them in financial distress if you are the sole or main breadwinner, if could also make you susceptible to unscrupulous fraudsters, who are known to prey on people in vulnerable circumstances.
5. It provides you with valuable flexibility in your financial affairs
As well as ensuring your financial affairs are managed according to your wishes, an LPA can provide a welcome level of flexibility when it comes to your wider financial planning.
For example, if you own your own business and will be spending some time overseas – maybe visiting relatives in Australia – you can use an LPA to appoint someone to manage your UK-based financial affairs on your behalf. Having someone “on the ground” to look after your business in this way can be invaluable.
The same is true if you know you’re going into hospital for a period, perhaps for elective surgery.
In each case, you can set up an LPA for a specific period of time to give whoever you nominate full legal authority to act on your behalf.
Get in touch
If you’d like to discuss LPAs or other ways to help ensure your wealth is protected if anything happens to you, please get in touch with us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC legislation, which is subject to change.