Keeping in mind
A lasting power of attorney keeps your affairs in the right hands if you lose mental capacity. But it’s not only for the elderly.
Imagine our surprise, or even shock, if we were told that 99% of the adult population had not written a Will. And yet fewer than 1% of adults have a lasting power of attorney (LPA) which, as oversights go, is almost as serious.1
Think of a lasting power of attorney as an insurance policy, and one that could some day prove vital. At a fraction of the cost of most policies, it insures individuals against losing the ability to look after their affairs. Everyone hopes they will never need it but, if they do, it will protect against an individual’s affairs being managed contrary to their wishes.
What exactly is an LPA? It’s a legal document in which an individual authorises someone, or perhaps more than one person, to make decisions on their behalf when they do not have the capacity to do so themselves. The person nominated is the ‘attorney’, and the person making the LPA is the ‘donor’.
There are two distinct types of LPA. The more commonly known variety is the property and affairs LPA, which deals with financial matters. Armed with this, the nominee can operate bank accounts, buy and sell property in the individual’s name and run their business or investments.
The other type is a personal welfare LPA, in which someone can stipulate the sort of care they want in later life – home nursing, say, or a particular type of care home. It can also include a do-not-resuscitate order. An unmarried couple could use an LPA to empower one partner to make medical decisions on behalf of the other. That could prove useful in hospitals where that right might otherwise be questioned.
The most common reason for having an LPA is dementia – one in every three people over the age of 65 will develop some form of dementia2. But the power doesn’t only come into play towards the end of life. People can lose their capacity to act at any time, through injury, accident or illness. Every 90 seconds, someone goes into hospital with an acquired brain injury, according to the charity Headway.
So while every older person should have an LPA, younger people should be thinking about it too. “Clients often ask us to draw up LPAs for their parents,” says Bernard Seymour, senior partner at solicitors Linder Myers. “But they very seldom consider that they should also be making one for themselves.”
Seymour recounts the story of one relatively youthful client who did have the foresight to draw up an LPA, and was grateful that he did. He had his own small business, for which his wife kept the books. While on holiday, he had a serious accident which left him in an induced coma for six weeks. The LPA meant his wife could keep the business going – paying the bills and maintaining access to the firm’s money – while he recovered.
“If you are mentally incapable and don’t have an LPA, you must apply to the Court of Protection to appoint a ‘deputy’ to act for you,” Seymour explains. “That’s very expensive and very slow. It can take three to six months, while the assets are largely in limbo and, frankly, the creditors don’t wait that long.”
Another alternative is to set up a joint account with a relative; but if the relative dies first, it’s back to the Court of Protection. If the relative gets divorced or goes bankrupt, the account could be exposed to costly claims.
Anyone over 18 years of age can be an attorney. This should, of course, be someone who can be trusted completely; a relative, a friend or, perhaps, a lawyer or accountant. More than one attorney can be selected, and replacements can be named in case the original attorneys become unable or unwilling to act.
Individuals can also determine how their attorney acts and which decisions they can and can’t make on your behalf, and provide guidance on how those decisions should be made. An attorney under a personal welfare LPA can only make decisions once the donor is judged incapable. But an attorney under a property and affairs LPA can act as soon as the LPA is registered, although restrictions on this can be included.
Neither kind of LPA is valid until it has been registered with the Office of the Public Guardian, which is essentially another face of the Court of Protection. Registration currently takes about three months, so it’s best to register the LPA before it is needed.
1 Source: Office of the Public Guardian, November 2014
2 Source: Age UK, February 2015
Please note that advice given in relation to a Power of Attorney will involve the referral to a service that is separate and distinct to those offered by St. James's Place and is not regulated by the Financial Conduct Authority.