Planning ahead with a Lasting Power of Attorney can help protect your finances, healthcare choices and those you care about.
Most of us are comfortable planning for the future. We save for retirement, arrange pensions and investments, make a Will and perhaps consider how our estate might eventually pass to our family.
However, there is another important area of planning that can easily be overlooked: what happens if you are still alive but can no longer manage your own affairs?
A Lasting Power of Attorney (LPA) allows you to appoint people you trust to make certain decisions for you. Importantly, it needs to be arranged while you still have the mental capacity to make that decision yourself.
For that reason, an LPA is not simply something to consider in later life. It can form an important part of sensible financial and family planning at almost any age.
What Is a Lasting Power of Attorney?
A Lasting Power of Attorney is a legal document that allows you, known as the donor, to appoint one or more people, known as attorneys, to make decisions on your behalf.
You must be aged 18 or over and have the mental capacity to make your own decisions when you create the LPA.
Once completed, the LPA must be registered with the Office of the Public Guardian before it can be used.
Further information about making and registering an LPA is available from the official GOV.UK Lasting Power of Attorney guidance.
There are two different types of Lasting Power of Attorney in England and Wales, and they cover very different areas of your life.
1. Property and Financial Affairs Lasting Power of Attorney
A Property and Financial Affairs LPA allows your chosen attorney or attorneys to help manage your financial affairs.
Depending on the circumstances and the instructions contained within the LPA, this can include dealing with:
- Bank and building society accounts
- Household bills
- Tax matters
- Pensions and benefits
- Investments
- Property
- Buying or selling your home
This can be particularly important where someone has substantial savings, investments, pensions or property.
A Property and Financial Affairs LPA can potentially be used while you still have mental capacity, provided the LPA allows this and you give permission. Therefore, it can also be useful if you remain perfectly capable of making decisions but need practical assistance managing your affairs.
2. Health and Welfare Lasting Power of Attorney
A Health and Welfare LPA covers decisions about your personal wellbeing rather than your finances.
For example, your attorneys may be able to make decisions concerning:
- Your medical care
- Where you should live
- Your daily routine and personal care
- What you eat
- Who you have contact with
- Certain decisions concerning life-sustaining treatment
Unlike a Property and Financial Affairs LPA, a Health and Welfare LPA can generally only be used when you are unable to make the relevant decision yourself.
This distinction is important. Having authority to manage someone’s money does not automatically give an attorney authority to make decisions about their healthcare.
Why Might You Need a Lasting Power of Attorney?
It is tempting to associate LPAs primarily with conditions such as dementia. However, loss of mental capacity can happen for many different reasons.
For example, an accident, stroke, serious illness or other unexpected event could temporarily or permanently leave someone unable to manage their own affairs.
Moreover, mental capacity is not necessarily an all-or-nothing issue. Someone may be able to make certain decisions while struggling with others.
An LPA therefore provides a framework under which trusted people can step in when necessary.
Isn’t a Will Enough?
No. A Will and a Lasting Power of Attorney perform completely different functions.
A Will sets out what should happen to your estate following your death.
A Lasting Power of Attorney, on the other hand, allows trusted people to make certain decisions for you during your lifetime.
Consequently, having a well-drafted Will does not remove the need to consider an LPA.
In fact, the two can be viewed as complementary parts of sensible estate and financial planning.
Can My Husband, Wife or Partner Automatically Deal With Everything?
This is a common misconception.
Being married or in a civil partnership does not automatically give someone unrestricted authority to deal with all of their partner’s financial affairs or make healthcare decisions on their behalf.
For example, difficulties can arise when dealing with accounts or assets held solely in one person’s name.
An appropriately drafted and registered Lasting Power of Attorney can therefore provide valuable clarity about who has authority to act.
What Happens If I Lose Capacity Without an LPA?
This is one of the most important reasons to consider arranging an LPA in advance.
If someone loses mental capacity without having made an appropriate Lasting Power of Attorney, their family cannot simply create one for them afterwards.
Instead, it may be necessary for someone to apply to the Court of Protection to become a deputy.
This is a different legal process and can potentially involve considerably more time, administration and expense than arranging an LPA while the individual still has capacity.
Therefore, an LPA is best regarded as something to put in place before it is needed.
Who Should You Appoint as an Attorney?
Choosing your attorneys is an extremely important decision.
An attorney should be someone you trust to act responsibly and in your best interests. Depending on your circumstances, this might be:
- Your husband, wife or partner
- An adult child
- Another family member
- A close friend
- A professional adviser
You can appoint more than one attorney. You can also specify how they should make decisions and appoint replacement attorneys in case one of your original choices can no longer act.
However, thought should be given to the practical consequences of these choices. Appointing several people may provide additional safeguards, but it can also make decision-making more cumbersome depending on how they are required to act.
Professional legal advice can therefore be valuable when deciding how an LPA should be structured.
What Responsibilities Does an Attorney Have?
Being appointed as an attorney is an important responsibility.
Attorneys must act in the donor’s best interests and, wherever possible, help the donor make their own decisions.
Among other responsibilities, an attorney dealing with financial matters should keep the donor’s finances separate from their own, maintain appropriate records and respect the donor’s confidentiality.
An attorney cannot simply treat the donor’s assets as if they were their own.
Therefore, it is sensible to discuss the appointment with your proposed attorneys before completing an LPA. They should understand both your wishes and the responsibilities they may eventually take on.
When Should You Make a Lasting Power of Attorney?
There is a simple answer: before you need one.
You can only make an LPA while you have the mental capacity to do so.
For this reason, waiting until someone is becoming seriously unwell can create unnecessary difficulties. In some cases, it may already be too late.
Arranging an LPA does not mean that you expect to lose capacity. Instead, it is a precaution against something that may never happen.
It is rather like making a Will. You hope that the document will not be required for many years, but having it in place can provide considerable reassurance.
How Much Does a Lasting Power of Attorney Cost?
There is currently an Office of the Public Guardian registration fee of £92 for each LPA in England and Wales.
Therefore, registering both a Property and Financial Affairs LPA and a Health and Welfare LPA currently costs £184 in registration fees.
Some people may qualify for a reduction or exemption from these fees depending on their income and circumstances.
There may also be professional fees if you use a solicitor or specialist estate planner to prepare the documents and provide advice.
Although it is possible to make an LPA yourself, professional advice may be particularly valuable where your circumstances are complex or you want to include specific instructions or safeguards.
How Long Does It Take to Register an LPA?
A Lasting Power of Attorney cannot be used until it has been registered with the Office of the Public Guardian.
Current government guidance states that registration generally takes around 8 to 10 weeks, provided there are no mistakes in the application.
This is another reason not to leave matters until an LPA is urgently required.
Putting the arrangements in place well in advance means that the registered document should be available if it is ever needed.
How Do LPAs Fit Into Financial Planning?
Financial planning is not only about building wealth. It is also about ensuring that your finances can continue to be managed effectively if your circumstances change.
Consider someone with pensions, investments, ISAs, bank accounts and property. If that person suddenly became unable to make financial decisions, somebody may need authority to communicate with providers, manage investments, pay bills or deal with property.
A Property and Financial Affairs LPA can therefore be particularly relevant as financial affairs become more substantial or complex.
Likewise, retirement and estate planning often involve decisions that may span many years. Thinking about who could manage those arrangements if you were unable to do so yourself can be an important part of the planning process.
Lasting Powers of Attorney and Estate Planning
LPAs can also sit alongside other areas of estate planning.
For example, a broader estate planning review might consider:
- Whether your Will remains appropriate
- Inheritance Tax planning
- Lifetime gifting
- Pension and investment arrangements
- Ownership of property
- Lasting Powers of Attorney
Each area addresses a different issue. However, together they can help ensure that both you and your family are better prepared for the future.
As with Inheritance Tax planning, taking action early often provides more options than waiting until circumstances force a decision.
A Simple Question Worth Asking
When considering your own arrangements, ask yourself:
If I could not manage my finances tomorrow, who would deal with them and would they have the legal authority to do so?
Then consider a second question:
If I could not make important decisions about my health or care, who would I want making those decisions for me?
If the answers are unclear, it may be worth reviewing whether Lasting Powers of Attorney should form part of your planning.
Planning Ahead Can Make Life Easier
Nobody likes to contemplate a time when they might be unable to manage their own affairs.
Nevertheless, making appropriate arrangements while you are fit and able to do so can make life considerably easier for the people closest to you.
A Lasting Power of Attorney allows you to decide who you trust, what authority they should have and, where appropriate, how you would like decisions to be made.
Ultimately, that is what good planning is about: making important decisions in advance rather than leaving them to be dealt with during a crisis.
If you are reviewing your retirement, investments or wider estate planning, it may therefore be worth considering whether your Will, Lasting Powers of Attorney and financial arrangements all remain appropriate for your circumstances.
Our Approach to Lasting Powers of Attorney
As part of good financial planning, we recommend that all clients consider putting appropriate Lasting Powers of Attorney in place.
An LPA can provide valuable reassurance that, should you become unable to manage your own affairs, people you know and trust have the appropriate authority to act on your behalf.
Where clients do not already have LPAs in place, we can recommend an experienced estate planning specialist who can provide appropriate advice and assist with putting the necessary arrangements in place.
Not necessarily. However, the two LPAs cover different areas. A Property and Financial Affairs LPA deals with financial matters, while a Health and Welfare LPA covers personal care and health-related decisions. Many people therefore choose to put both in place.
Yes. You can appoint more than one attorney and decide how they should make decisions. You can also appoint replacement attorneys in case one of your original attorneys becomes unable to act.
No. You must have the necessary mental capacity when you make an LPA. If capacity has already been lost, an application to the Court of Protection may be necessary instead.
Not necessarily. A Property and Financial Affairs LPA may allow an attorney to act while you still have capacity, but this depends on the terms of the LPA and your permission. A Health and Welfare attorney can generally only make a decision when you cannot make that particular decision yourself.
No. Creating an LPA does not in itself mean handing over control of your life. While you have capacity, you continue to make your own decisions. The purpose of the LPA is to ensure that people you have chosen can act when appropriate.
Yes. Provided you still have mental capacity, you can cancel an LPA if you no longer want it or decide to make a new one.
Important Information
This article is for general information only and does not constitute financial or legal advice. The information relates primarily to Lasting Powers of Attorney in England and Wales and is based on our understanding of the rules at the time of publication. Different arrangements apply in Scotland and Northern Ireland.
Whether a Lasting Power of Attorney is appropriate, and how it should be structured, will depend on your individual circumstances. You should consider taking appropriate legal advice before making or changing an LPA, particularly where your financial, family or personal circumstances are complex.
LFP Asset Management Independent Investment Advisers does not provide legal advice. Where appropriate, we can introduce clients to an experienced estate planning specialist for advice on Wills, Lasting Powers of Attorney and related estate planning matters.
The information contained in this article should not be relied upon as a substitute for personalised professional advice.