Lasting Power of Attorney as insurance

A Lasting Power of Attorney keeps your affairs in the right hands if you lose mental capacity, but it’s not only for the elderly.

Lasting Power of Attorney: Keeping in mind | 13 March 2015

Imagine if we were told that 99% of the adult population had not written a Will, and yet fewer than 1% of adults have a Lasting Power of Attorney (LPA) which, as oversights go, is almost as serious.

Think of a Lasting Power of Attorney as an insurance policy, and one that could some day prove vital. At a fraction of the cost of most policies, it insures individuals against losing the ability to look after their affairs. Everyone hopes they will never need it but, if they do, it will protect against an individual’s affairs being managed contrary to their wishes.

What exactly is an LPA? It’s a legal document in which an individual authorises someone, or perhaps more than one person, to make decisions on their behalf when they do not have the capacity to do so themselves. The person nominated is the ‘attorney’, and the person making the LPA is the ‘donor’.

Bow of a sail yacht at sea

Lost capacity

There are two distinct types of LPA; the more commonly known variety is the property and affairs LPA, which deals with financial matters. Armed with this, the nominee can operate bank accounts, buy and sell property in the individual’s name and run their business or investments.

The other type is a personal welfare LPA, in which someone can stipulate the sort of care they want in later life, such as home nursing or a particular care home. It can also include a do-not-resuscitate order. An unmarried couple could use an LPA to empower one partner to make medical decisions on behalf of the other, which could prove useful in hospitals where that right might otherwise be questioned.

The most common reason for having an LPA is dementia. One in every three people over the age of 65 will develop some form of dementia, but the power doesn’t only come into play towards the end of life. People can lose their capacity to act at any time, through injury, accident or illness. Every 90 seconds, someone goes into hospital with an acquired brain injury, according to the charity Headway.

So while every older person should have an LPA, younger people should be thinking about it too. Bernard Seymour, senior partner at solicitors Linder Myers explained, “Clients often ask us to draw up LPAs for their parents, but they very seldom consider that they should also be making one for themselves.”

A sail yacht at sail at sunset

Valuable foresight

Seymour continued, “If you are mentally incapable and don’t have an LPA, you must apply to the Court of Protection to appoint a ‘deputy’ to act for you. That’s very expensive and very slow. It can take three to six months, while the assets are largely in limbo and, frankly, the creditors don’t wait that long.”

Another alternative is to set up a joint account with a relative; but if the relative dies first, it’s back to the Court of Protection. If the relative gets divorced or goes bankrupt, the account could be exposed to costly claims.

Anyone over 18 years of age can be an attorney. This should, of course, be someone who can be trusted completely; a relative, a friend or, perhaps, a lawyer or accountant, although more than one attorney can be selected, and replacements can be named in case the original attorneys become unable or unwilling to act.

Individuals can also determine how their attorney acts and which decisions they can and can’t make on your behalf, as well as providing guidance on how those decisions should be made. An attorney under a personal welfare LPA can only make decisions once the donor is judged incapable, but an attorney under a property and affairs LPA can act as soon as the LPA is registered, although restrictions on this can be included.

Neither kind of LPA is valid until it has been registered with the Office of the Public Guardian, which is essentially another face of the Court of Protection. Registration currently takes about three months, so it’s best to register the LPA before it is needed.

For more information, visit St. James's Place Wealth Management.

Source: Office of the Public Guardian, November 2014

2 Source: Age UK, February 2015