What is a Lasting Power of Attorney and Do You Need One?
UK: Estate Planning
As we go through life, it's easy to focus on day-to-day matters and put off important long-term decisions. However, planning for the future is essential, especially when it comes to ensuring your wishes are followed and your family is able to properly take care of you if you're no longer able to make decisions for yourself. One of the most effective tools for safeguarding your future is a Lasting Power of Attorney (LPA). But what exactly is an LPA, and why should everyone consider having one? In this post, we'll explore the ins and outs of LPAs and why they are a key element of any solid life plan.
What is a Lasting Power of Attorney (LPA)?
An LPA is a legal document that allows you, the 'donor,' to appoint one or more people called 'attorneys' to make decisions on your behalf if you're no longer able to do so. There are two types of LPAs, and each serves a distinct purpose:
Health and Welfare LPA: This type of LPA gives your attorneys the authority to make decisions about your personal welfare, such as medical treatment, daily care, and even where you should live. It only comes into effect if you lose the mental capacity to make decisions yourself.
Property and Financial Affairs LPA: This LPA allows your attorneys to handle your finances, including managing your bank accounts, paying bills, collecting benefits, and even selling property. You can choose whether this type of LPA comes into effect immediately or only if you lose mental capacity.
Both types of LPAs are designed to ensure that your best interests are protected if you're unable to make your own decisions, whether due to illness, injury, or age-related mental incapacity.
Why You Need an LPA
Many people assume they won't need an LPA unless they are elderly or already facing health issues. This assumption is dangerous. An LPA can protect anyone over the age of 18 who could be affected by unforeseen events, such as an accident or sudden illness. Here are some key reasons why having an LPA is essential:
Future-Proofing Your Life
An LPA ensures that someone you trust can step in and make critical decisions if you lose the ability to do so yourself. Without one, your loved ones may be left powerless to act on your behalf, leaving them to navigate complex legal hurdles during an already difficult time.
Avoiding Court Intervention
If you become unable to manage your own affairs and don't have an LPA in place, your family or friends may need to apply to the Court of Protection for a 'Deputyship.' This process can be lengthy, expensive, and emotionally taxing. By creating an LPA, you bypass the need for court intervention, saving both time and money.
Ensuring Your Wishes are Respected
An LPA allows you to set out your preferences clearly. For example, you can specify the type of care you wish to receive in certain medical situations, or you can outline how your financial assets should be managed. This way, your attorneys can make decisions in line with your personal values and instructions.
Avoiding Family Disputes
When someone becomes incapacitated without an LPA, family members often disagree about the best course of action. By appointing specific attorneys through an LPA, you reduce the likelihood of disputes and ensure that the person you trust most is the one making the final decision.
Key Benefits of an LPA
There are numerous benefits to setting up an LPA, including:
Control Over Your Affairs: You decide who manages your personal and financial affairs, rather than leaving the decision to the courts.
Flexibility: LPAs can be tailored to meet your specific needs. For example, you can limit the power of your attorneys or allow them to act in certain areas only.
Peace of Mind: Knowing that your affairs will be handled by someone you trust provides invaluable peace of mind to both you and your family.
Protection if You Lose Mental Capacity: Conditions like dementia, strokes, or serious accidents can result in a loss of mental capacity. Having an LPA in place ensures that you're prepared, no matter what happens.
How to Set Up an LPA
The process of setting up an LPA is straightforward, but it’s important to follow each step carefully:
Choose Your Attorneys: Think carefully about who you want to act on your behalf. Choose someone you trust implicitly and who understands your wishes. You can appoint more than one attorney and decide whether they should act together (jointly) or separately (jointly and severally).
Decide the Scope of Their Powers: Consider what decisions you want your attorneys to be able to make. You may wish to give them full authority or limit their powers to certain aspects of your life, such as healthcare but not finances.
Speak to a Solicitor or Complete and Register the Forms: You don’t have to use a solicitor to put an LPA into place, but we recommend it. A solicitor’s advice may save you problems and disputes later on, and you’ll have the peace of mind of knowing that your LPA is valid and enforceable. If your assets and affairs are complex, speaking with a solicitor first is highly recommended. If you forgo the advice of a solicitor, you’ll need to fill out the relevant forms, which are available from the Office of the Public Guardian (OPG). Once completed, the forms must be registered with the OPG before they can be used. This process typically takes 8-10 weeks.
Fees and Timescales: There is a registration fee for each LPA, which is currently £82 (as of 2024). The fees that solicitors charge (in addition to the registration fee) will vary. Speak to your solicitor about fees at the outset of the engagement to ensure that you’re not surprised.
Common Misconceptions About LPAs
There are several misconceptions that stop people from setting up an LPA. Let’s debunk a few of them:
“I have a will so I don’t need an LPA”: an LPA is effective during your lifetime, giving your attorneys authority to make decisions in accordance with the type of LPA in place. This authority ends upon your death, after which the administration of your estate will be handled by the executors you name in your will.
“I’ll sort it out later”: Waiting until something happens is a risky approach. If you lose capacity before creating an LPA, it’s too late to put one in place, leaving your loved ones with no legal authority to make decisions.
“My family will automatically be able to manage my affairs”: Many people believe their spouse or children will automatically have the right to make decisions for them. This isn’t true. Without an LPA, your family members would need to apply to the court for the right to act on your behalf.
The Role of an Attorney
Attorneys have a serious responsibility to act in your best interests. They must follow strict legal guidelines, including:
Acting in Your Best Interests: They are legally obligated to act in a way that benefits you, taking your wishes into account as much as possible.
Keeping Accurate Records: Attorneys must keep detailed records of all financial transactions and decisions made on your behalf.
Respecting Any Limits: Your attorney cannot make decisions that are outside the scope of the powers you’ve given them, such as changing your will or acting before the LPA is registered.
A Key Part of Your Plan and Your Stronghold
Planning for the future is something we all need to prioritise, and establishing an LPA is a vital step in that process. An LPA ensures that your wishes are honoured and trusted individuals have the legal authority to make decisions on your behalf if you're unable to do so.
To ensure your LPA is easily accessible, store an electronic copy in your Stronghold, alongside other important records that relate to your estate plan, property, insurance and investments. Don’t wait until it’s too late. Setting up an LPA now and ensuring that your Stronghold contains all of the necessary information will give you peace of mind and protect both you and your loved ones.
Note: This blog post is for general informational and educational purposes only and should not be construed as legal, financial or tax advice. The content of this post is not a substitute for specific legal, financial or tax advice or any other professional services. We strongly encourage you to consult with a qualified solicitor, tax professional, financial advisor or other relevant expert before taking any action.