We all like to stay in control of our finances and nobody likes to think about a time when they may be unable to manage their personal affairs. Yet unexpected events could affect our ability to do so, a real challenge that many people face in their lifetime – but you can be prepared so that your financial wishes are protected.
According to the Alzheimer's Society, more than 1 million people in the UK will have dementia by 2025. More than 1 in 5 people over 85 already suffer from this, with rates significantly higher among women than men. Accidents, strokes, brain injuries and Parkinson's disease can also affect someone's ability to make their own decisions.
In such cases a Lasting Power of Attorney (LPA) can protect you and your loved ones from what can become a very challenging situation.
What is an LPA?
In brief, an LPA allows an appointed person or persons to take care of you and your finances if you can’t do so yourself. There are two types of LPA:
- A ‘Property and Financial Affairs’ LPA allows your loved ones to deal with paying your bills, buying and selling your property and managing your bank accounts and investments. You can restrict the types of decisions your attorney can make: for example, regarding your bank accounts but not your home, or you can let them make all decisions on your behalf.
- A ‘Health and Welfare’ LPA covers decisions about health and care and even deciding where you are to live. This can only be used if someone is incapable of dealing with such matters themselves. You can also give special permission for your attorney to make decisions about life-saving treatment.
An LPA can be used for a temporary situation, for example, if you are in hospital and need help with everyday tasks such as paying bills, or it can form part of longer-term planning if you are concerned about the possibility of losing the capacity to make your own decisions in the future.
What are the risks of not having an LPA?
Where an account holder loses mental capacity and there is no registered LPA in place, their loved ones won’t be able to access assets that may be needed to meet essential costs, such as ongoing financial obligations and medical bills. This can be particularly problematic with joint accounts, where the second account holder may be restricted from accessing their own money.
In such cases an application must be made to the Court of Protection, appointing a deputy to deal with everyday financial matters. This is a slow and expensive process. If it is necessary to appoint a lawyer to help you, the costs can increase dramatically.
Those who are married or in a civil partnership may assume that their spouse can automatically deal with their bank accounts, investment portfolios and pensions. But this is not the case – without an LPA they do not have the authority.
Of course, you can appoint more than one person to act on your behalf and can choose anyone you wish. Depending on your circumstances it may be preferable to appoint one or more of your children or another person you trust, as your spouse or partner may themselves become incapacitated at some point.
How to set up an LPA
Anyone can set up an LPA and there are several useful resources online, such as ageuk.org and gov.uk, providing detailed information on how to go about this and get advice on important considerations such as choosing an attorney.
What investors should do
Your investment holdings could be substantial, especially if you have been saving throughout your life and plan to retire comfortably and gift significant amounts to your family.
With the knowledge that your spouse cannot automatically take control of your financial affairs – only perhaps through a time consuming and costly intervention – it is even more important to ensure your investment goals are maintained. An assessment of your circumstances may also present a good opportunity to open up an important dialogue with your family about effectively passing on your wealth to the next generation.
As we don’t provide legal advice we can only encourage investors to ensure that they understand the services available to them, and to take whatever steps are necessary to ensure their financial wishes are protected.
Please note, the value of your investments can go down as well as up.