Holborn Assets UK: Lasting Power of Attorney Explained8th November 2015
It is widely accepted that a Will is essential to protect your family, your interests and your wishes after you die. Less often discussed, but equally important is the Lasting Power of Attorney. Indeed, the new freedom in pension wealth access and retirement financing has made an LPA a necessity.
What Is a Lasting Power of Attorney?
A lasting power of attorney (LPA) is a legal document which appoints one or more persons (Attorneys) to manage affairs of another person (a Donor), typically in case of physical or mental incapacity of the latter. These affairs include decisions about finances, health and welfare. There are two types of LPA, based on the areas where an Attorney has power to decide:
- Property and Financial Affairs LPA, which applies to decisions such as paying your bills, drawing your pension, managing your bank or investment accounts, or selling your house.
- Health and Welfare LPA, which applies to decisions such as where you live, where you receive care, consent with particular medical treatment, as well as daily routine such as diet or dress.
Why Is It Important?
Not all people are lucky enough to enjoy good physical and mental health until their death. If you have an accident or develop a condition (like dementia) which makes you unable to handle your own affairs (you “lack mental capacity”), those who will be making the decisions for you need a legal basis to act on your behalf.
In absence of an LPA, your family will need to be appointed as deputies by the Court of Protection. This process can be lengthy and costly. In the meantime, you may not have access to your pension and your bills may be left unpaid, with all the various consequences that can have. Not least, you won’t have much say in who the appointed deputies will be, as you will already be unable to express your wishes or considered incapable.
On the contrary, if you appoint a Power of Attorney while you are still healthy and able (which is a necessary legal precondition for doing so), you will be able to personally select one or more people you trust. Appointing an LPA is also much cheaper and easier than going through the Court of Protection deputy appointment procedures.
How to Make a Lasting Power of Attorney
First you need to select one or more people as your Attorneys. Some restrictions apply – children under 18, people incapable of making their own decisions or those who have been declared bankrupt are disqualified from being an Attorney.
Then you need to fill out the forms (available on the gov.uk website). You can do that yourself or have someone else (e.g. a solicitor or advisor) do it for you. In any case, you need to sign the forms (by yourself, the Attorneys and witnesses) and pay a £110 fee. If you need to make both types of LPA, you will need two applications and pay two times the fee; reductions and exemptions apply.
Finally, for an LPA to take effect and for your Attorneys to be able to legally act on your behalf, you will need to register the LPA with the Office of the Public Guardian. While the Property and Affairs LPA can be used as soon as it is registered, the Health and Welfare LPA only applies once the Donor actually loses capacity to make own decisions.
The Best Time Is Now
According to estimates, only 1% of British adults have a Lasting Power of Attorney in place. Like with a Will, it may feel like there is plenty of time to get this sorted, especially if you enjoy good health and a scenario of your own incapacity seems very distant and unlikely. In any case, at least make sure you understand what exactly would happen to your pension, your various accounts and your bills should you suddenly become incapable of signing and making decisions.