Having up-to-date Lasting Powers of Attorney (LPA) in place is an essential part of your estate planning. Whatever your age, whatever the state of your health, don’t underestimate the role of an LPA in safeguarding your future.
Mental and physical incapacity can happen at any time and LPAs can ease the burden on your family and, if you have one, your business. An LPA allows you to appoint someone (and often more than one person) to make decisions on your behalf. You don’t have to have a diagnosed medical condition in order to set one up.
If you don’t have an LPA and you become mentally incapacitated, your loved ones may have to apply to the Court of Protection, during which time they will not have access to your finances. A court application can also be slow and expensive. If you have a business, this can significantly impact the running of that business.
There are two types of Lasting Power of Attorney: one that covers financial decisions and one that covers decisions about healthcare. They allow you to legally appoint another individual to make decisions on your behalf in the event of your incapacity. You can set up either or both. Setting up both is strongly recommended.
A Health and Welfare Lasting Power of Attorney (Health LPA)
The Health LPA allows your attorney to make decisions about what medical treatment you receive (including life-sustaining treatment) as well as making decisions about where you live. It also covers decisions about your day-to-day care such as diet and daily routine. With this type of LPA, your attorney can only make decisions when you no longer have mental capacity.
A Property and Financial Affairs Lasting Power of Attorney (Financial LPA)
A Financial LPA allows your attorney to manage your bank and savings accounts, make or sell investments on your behalf, pay bills for you and even buy or sell property for you. It also means your attorney can claim, receive and use your benefits, pensions and allowances on your behalf. Unlike a Health LPA, a Financial LPA allows your attorney to manage your financial affairs when you still have the mental capacity, which can be important if you are unable to get out and about. It is however, possible to specify that the LPA cannot be used unless you have lost capacity if that is your preference.
It’s worth noting that a Financial LPA only relates to money and property in England and Wales, so if you have property or investments overseas, you will need to take professional advice about the law governing that country.
It’s also important to ensure that your LPAs are drafted to include the clauses that are relevant to your situation. For example, if you have investments and assets but your financial LPA does not include a discretionary fund management clause, then your current asset manager will no longer be able to manage those investments under the LPA.
Importance of LPAs for business owners
If you have a business, you can appoint different attorneys for your personal and business affairs by having two separate LPAs – one that covers personal financial matters and one that specifically relates to your business affairs only. Putting a business LPA in place is a way of ensuring your business can continue to run if you are incapacitated or unable to make decisions.. Without one, an application to the Court of Protection may be needed before the business could move forward and the time and expense involved could impede the normal running of the company. There is also the possibility in this instance that the Court would not appoint an individual who the business owner themselves would have chosen to take over.
How to set up a LPA
It is possible to set up an LPA yourself using online forms but a DIY approach can lead to mistakes and render it invalid or make administering your affairs difficult for your attorneys in the future. An LPA is a powerful document and so it is advisable that you seek professional assistance to ensure it is drafted correctly and that everything is taken care of.
Your chosen attorney doesn’t need to have any legal or ‘attorney’ experience, but it helps if they’re based in the UK. Acting as a attorney is a position of responsibility and it is important that you chose your attorney(s) carefully and that they are happy to take on the role. Provided they are over 18 and have the mental capacity, you can choose almost anyone: a friend, relative, your partner, parents, children or a professional.
With an appropriate LPA in place, you know that someone you trust and who knows your preferences and specific instructions will be in charge of your care and your finances. Don’t make the mistake of putting it off until it’s too late.
If you would like us to review your current LPAs or would like to discuss putting LPAs in place, please get in touch.
