One of the financial impacts of the pandemic on the average person has been the realisation that being able to have someone else able to act on your behalf in financial and personal welfare matters should be a key part of your financial planning.
Everyone who has a joint asset i.e. a bank current account or deposit account or a joint debt such as a mortgage, should at least have an Ordinary Power of Attorney so that if one of you is not available, as a result of being on holiday or in hospital for example, the other can engage with the financial institution with your authority.
The same logic of course applies to sole assets that are part of a family’s wealth.
An Ordinary Power of Attorney can only be effected when you have mental capacity so what happens if you or a loved one find themselves in a position where mental capacity is lacking? This situation could arise for a number reasons including dementia or an accident or illness resulting in a coma.
If you lose capacity, your friends and family will have to apply to the Court of Protection to manage your finances. This process can take time, incur fees and could lead to financial problems due to delays in decisions and actions being taken.
To avoid this situation arising, we recommend that you set up a Lasting Power of Attorney (LPA) which will give another person (the ‘attorney’) the right to manage your affairs if you (the ‘donor’) are unable to do so due to losing mental capacity.
There are two types of LPA, one covering property and financial affairs, the other health and welfare. It is important to set up both.
When should I set up a power of attorney?
You should set up a LPA as soon as you can. They will only be needed if you lose mental capacity. We all hope they won’t be needed but like all good legal documents, they are there ready and waiting if required. Having a LPA in place will ensure that your financial and welfare plans can be managed more easily by your chosen attorneys, without having to apply to the Court of Protection.
How do I set one up?
The government provide a useful guide and the Office of the Public Guardian forms are available on the government website.
You can fill out the forms yourself, or with the help of a solicitor or local advice agency. Taking professional advice can prevent problems later on, especially if you are unsure of the process or your affairs are complex. We would always recommend that you seek legal advice regarding LPAs. If you do not have a solicitor we can put you in touch with legal contacts in your area who can help you.
The LPA then needs to be registered with the Office of the Public Guardian.
Who needs to be involved?
You will need to ask your attorney if they are willing to accept the responsibility to manage your finances and make decisions about your welfare.
An LPA must also be signed by a certificate provider. The role of the certificate provider is to confirm that you understand what the LPA is for and how it works, that you have mental capacity to sign it and that you haven’t been put under any pressure to sign it. The certificate provider must be someone you know well or a professional person such as a doctor, social worker or solicitor.
Please also ensure that we are notified, as your financial adviser. This will help us to support the attorney if the LPA needs to be activated and we will record this on our records.
You should also let us know if you establish an Ordinary Power of Attorney. These do not need to be registered with the Office of the Public Guardian.
How to make an LPA effective
The LPA must be registered with the Office of the Public Guardian before it can be used. There’s a fee of £82 to register your LPA. In England and Wales, the registration fee is £82 for each LPA, and in Scotland the fee is £81 – so it costs £164 or £162 in Scotland to register both an LPA for property and financial affairs and an LPA for health and welfare.
You must still have mental capacity when you register your LPA. The registration process can take up to twelve weeks at present (with staff shortages due to the pandemic) and the LPA cannot be used until the registration process is completed. If you do lose mental capacity during this registration process, but signed the LPA while you still had mental capacity, your attorney can register it for you.
You can set up an ordinary power of attorney through your local Citizen’s Advice or get advice from a solicitor as there is a standard form of wording that should be used.
Should I review existing LPAs?
As part of your annual family financial review we would recommend that if you already have a registered LPA you should check if any changes are needed, such as changing the attorney. If you do need to update your LPA, you will need to complete a deed of revocation and register a new LPA with the Office of the Public Guardian.
Enduring Power of Attorneys (EPA)
Before October 2007, a slightly different process existed. An Enduring Power of Attorney (EPA) gives the attorney the ability and authority to assist with decisions immediately and the EPA only needs to be registered at the point the donor (the person establishing the EPA) starts to lose mental capacity.
If you signed an EPA before 1 October 2007, these can still be used. If you signed one after 1 October 2007, you will need to replace the EPA with a LPA.
What action do you need to take?
If you have any questions regarding your existing LPA or EPA or want to discuss the benefits of having a LPA, please contact your Origen adviser, however we always recommend that you seek legal advice regarding LPAs. We can make sure that our records are updated to show that you have a LPA in place, however, you or your legal adviser must register the LPA with the Office of the Public Guardian for it to be effective.
This update is intended to be for information only and should not be taken as financial advice.
CA6807 Exp 05/2022