Most people realise that they need to put a will in place but whilst this sets out how your estate will be dealt with after you die, it is of no use whilst you are still alive.
To ensure you are adequately cared for in your lifetime (should you not be able to do this yourself because you are incapacitated), you need a lasting power of attorney (LPA).
What is an LPA?
This is a legal document whereby you appoint someone else (your attorney) to make decisions about your finances, property, money, health or welfare at some point when you might need it. There are two sorts of LPAs – one to cover property and finance decisions (to assist with paying bills, buying and selling property and managing your bank accounts and investments) and one to cover health and welfare decisions, if you are incapable to do so yourself (including health decisions and care, and even deciding where to live). You can put one type in place or both – they are separate documents.
How is an LPA made?
The government is proposing to reform the law on making LPAs, essentially to support a better digital system for their creation and registration. This will in turn speed up the process and reduce the backlog of registrations, currently taking around 20 weeks to be registered and activated. If you are considering making an LPA, it is important to instructing a solicitor to ensure you are carefully advised on all aspects of drawing-up the document and receive assistance in ensuring that the document is signed correctly. An incorrectly drafted or ill-advised LPA can lead to issues down the line when the document is being used.
Do I need an LPA?
More of us are now living longer but this means we might well suffer poor health in later life and therefore might need some form of care. If you have a stroke or dementia then you might think it is automatic that a family member can assist you in your finances and care, but this isn’t the case.
When should I put an LPA in place?
It is better not to wait until you are elderly as it may be too late – you must have mental capacity to put an LPA in place. We can never predict when we might have health problems.
What if I don’t have an LPA and lose mental capacity?
Without an LPA, your family might have to apply to the Court of Protection to gain authority to help you (called a deputyship). The court decides who will be appointed and this might not be someone you would choose. This can take many months, during which time, your finances cannot be managed.
When does an LPA take effect and when should I put one in place?
An LPA only becomes effective when it is registered by the Office of the Public Guardian and activated. As this can take eight weeks or so, it is better to have it registered as soon as it is signed. You can decide when it comes into effect – either straightaway or only if you lose mental capacity. It is better not to restrict the LPA too much so it is there when it is needed – often in emergency situations – e.g. you have had a stroke or an accident. As an example, you may never lose mental capacity but you might have physical difficulties where you can’t sign your name on cheques any longer and therefore need an LPA in place.
Who can I choose as my attorney?
Most people over 18 can be your attorney and they don’t have to be in the UK. It is important to choose someone you trust. You can have more than one person, as well as substitutes. They will act as your agent in making decisions about your finances and health although they cannot make a will for you, consent to marriage or divorce, or make large gifts (say for estate planning).
Failing to be advised on the risks involved could result in the appointment of an attorney who may misuse their authority, or fail to act in your best interests. This could lead to financial exploitation, not receiving proper care or your wishes being disregarded.
I have an EPA – is this still valid?
Prior to October 2007, we had enduring powers of attorney (EPAs) rather than LPAs. Those created are still valid, although an LPA can be more comprehensive. EPAs don’t cover health decisions, only financial decisions, so if you have one, you might want to consider a health LPA.
Do I need a solicitor to draw up my LPA?
Technically, no you don’t – it is possible to make your LPA yourself online. However, they are easy to get wrong – seeing a solicitor who specialises in this area is invaluable. Thousands of LPA applications are rejected by the Office of the Public Guardian every year simply due to mistakes made within the application itself, most commonly:
- Missing information;
- Incorrect signing order;
- Incorrect witnesses;
- Unworkable LPA requests;
- Not providing full names.
This can lead to delays, stress and, in some cases, additional costs. A solicitor can advise to make the LPA as flexible as possible, discuss who should be your attorney bearing in mind your family structure or how to manage complex assets.
How can I make sure I am protected by an LPA?
Appointing an Attorney under an LPA is a huge decision and should not be made lightly. The reason many people enter into an LPA is to make their life and their families lives easier. If you are not correctly advised on the drawing up of the document and the impact that document can have when it is in use, it is likely that this document can complicate matters, taking away from the original intention to make your life easier. To ensure the application goes smoothly it is always best to seek legal advice from those who specialise in LPAs to ensure you understand the process and potential risks. Our private client team will be happy to help.