It is not at all uncommon for clients to tell us that they have never heard of Lasting Powers of Attorney (‘LPAs’) or, if they have, that they don’t need one until they’re older. Nowadays more people have heard of them but still think that they are really only for older people. However, the importance of having LPAs in place at any age cannot be underestimated.
What is a Lasting Power of Attorney?
An LPA is a legal document by which you appoint someone else to be your ‘Attorney’ to deal with your affairs if you are unable to act yourself.
This could be because you have lost mental capacity through an accident or illness or it could be because you are not physically able, for example, you are abroad or in hospital and there are practical reasons why you cannot deal with your affairs personally.
In short, it is an insurance policy which you put in place to ensure that, if you are unable to deal with your affairs yourself, someone who you know and trust and who you have chosen yourself will step in to look after your affairs. Unlike most insurance policies, however, you pay only one premium and you are covered for life.
Do I Need an LPA?
LPAs are often associated with the elderly, however, LPAs are relevant to everyone. Why?
Here are a few points to consider:
- While the risk of losing capacity may seem greater when you are older, incapacity can strike at any time, for example, as a result of a serious accident or sudden illness – a public figure recently spoke about this when her husband fell ill with Covid, and the hardship she went through because she could not access his accounts and had to rely on the generosity of family and friends to survive.
- Do you have joint accounts with your partner or another person? If you lose capacity, your bank may freeze these accounts without sight of a valid LPA. How would the co-account holder be able to pay the bills and other costs if these accounts could not be accessed?
- If you have bank accounts in your sole name, these are blocked and all payments out, including direct debits, are stopped. How do your mortgage and other bills get paid? This could also have a negative impact on your credit score and prevent you from obtaining credit once you are recovered.
- We live in an ageing society and, with the increasing risk of developing a mental illness such as dementia, it is important to consider what would happen to your affairs if you were to develop such a disease. It is less stressful and upsetting to make these decisions at a time when you are fit and well, rather than when the need for an LPA becomes urgent.
Not just for personal affairs
- Do you have a business? What would happen if you were abroad or involved in an accident when an important action needed to be taken? If you are a sole trader, how will your creditors be paid? How will the rent on your premises and your taxes be paid? If you employ staff, how will their wages be paid? If you are a shareholder/director of a company, how will decisions be made? Will losing capacity also mean losing business? LPAs can be used to appoint your business associates to deal with business matters; they are not only for your personal affairs.
- Do you live abroad or travel a lot? If so, it might be appropriate to appoint an Attorney to deal with your assets in this country, so that steps can be taken in your absence (with your consent).
What Happens if I Don’t Have an LPA in Place and I Suddenly Need One?
If you lose mental capacity, it has become too late to make an LPA. Your assets would be frozen and nobody could legally access them, even if it is to pay for your care.
An application would then need to be made by someone (not necessarily the person you would choose – and it could even be the Local Authority) to be appointed as your ‘Deputy’ by the Court of Protection. This process is more time consuming, costly and stressful for the parties involved at a time when you are in urgent need of care and support.
There are two types of LPA; one for Property and Financial Affairs decisions and the other for Health and Welfare decisions.
Each document must be carefully set up, and your attorneys considered fully. You can give instructions or set out preferences as to how your attorneys should act and how and when replacement attorneys can step in if anything happens to your main attorneys.
Our team can advise you on both types of LPA and help you decide which best suit your needs.
For further information regarding LPAs and the process involved in making an LPA, please contact a member of our Tax, Trusts and Estates team.