As we have seen over recent months, illness or injury can strike at any time.
Suddenly, you may find yourself in a position where you’re no longer able to make decisions for yourself. Whether that’s through an accident, an extended stay in hospital, or the loss of mental capacity through illness, thousands of people each year lose the ability to make important decisions about their lifestyle and finances.
And, it’s not just older people that are affected. Coronavirus has demonstrated that even younger adults can become seriously ill, and in these circumstances they would benefit from a trusted person being able to administer their affairs on their behalf.
A Lasting Power of Attorney (LPA) is an arrangement whereby you can appoint a trusted family member, colleague, or friend to make decisions on your behalf if you’re suddenly unable to. Introduced in 2007 to replace the previous Enduring Power of Attorney regime, LPAs are something all adults should consider, irrespective of age or health.
Here are five reasons to consider setting up your own LPA today.
1. You could lose mental capacity at any time
You never know when you might lose mental capacity; namely the ability to make or communicate specific decisions.
When you have mental capacity, you understand the decisions you need to make, why you need to make them, and the likely outcome of your decisions. Losing this has serious implications for decisions concerning your day-to-day care and your finances.
Losing mental capacity can happen at any time. While this is most associated with old age, a car accident or an illness such as coronavirus could leave you seriously ill and unable to make decisions for yourself. So, it’s crucial to ensure that there is someone you trust who is legally empowered to look after you and your affairs on your behalf.
2. An LPA ensures your wishes are met
There are two types of LPA:
- LPA for property and financial affairs
- LPA for health and welfare
LPA for property and financial affairs
An LPA for financial decisions can be used while you still have mental capacity if you no longer wish to manage your financial affairs. Alternatively, you can state that you only want the LPA to come into force if you lose capacity.
An LPA for financial decisions can cover things such as:
- Buying and selling property
- Paying your mortgage and household bills
- Saving and investing money
- Arranging repairs to property.
When a financial LPA is set up, your attorney(s) must keep accounts and make sure their money is separate from yours. You can ask for regular details of how much they have spent and how much money you have. You can also insist that your attorney(s) send these details to your solicitor or a family member if you lose mental capacity.
LPA for health and welfare
This LPA covers health and care decisions and can only be used once you have lost mental capacity. Your attorney can generally make decisions about things such as:
- Where you should live
- What medical care you receive
- What you should eat and drink
- Who you should have contact with
- What kind of social activities you should take part in.
You can also give special permission for your attorney to make decisions about life-saving medical treatment.
To ensure all your affairs are managed with when you no longer can, it makes sense to set up both types of LPA. It may also make sense to appoint different attorneys to look after each LPA, which brings us to…
3. You can choose a person you trust
When setting up an LPA, you can choose who you wish to nominate as your attorney. This can be a friend, family member, or colleague, and you can appoint one or more representatives to act for you and determine how they work together to make decisions on your behalf.
For example, you can specify whether your attorneys need to make decisions jointly (a good idea if you want two opinions on your finances) or whether each can decide things without the other.
You may want to appoint different people to look after different aspects of your care. For example, a trusted colleague might be the best person to appoint as an attorney to look after your business interests, while you may want a family member to make decisions about your care.
Your attorney should be someone you really trust. For most people, that’s their husband, wife, partner, another family member, or a close friend. You should also choose at least one replacement attorney who would take over if your attorney died or could no longer act for you.
4. Setting up an LPA could be cheaper than the alternative
You must register an LPA before you can use it. In England and Wales, the registration fee is £82 for each LPA – so it costs £164 to register both an LPA for property and financial affairs and an LPA for health and welfare.
You may be exempt from paying the fee if you're on a low income or you receive certain income-related benefits.
To set up an LPA, you should contact the Office of the Public Guardian to get the relevant forms and an information pack. You can download the forms or fill them out online – either by yourself or with the help of a solicitor. Taking professional advice can prevent problems later, especially if you’re unsure of the process or your affairs are complex.
You must register your LPA while you still have the mental capacity and it can’t be used during the registration process which takes around 8 to 10 weeks.
If you lose mental capacity and you don’t have an LPA in place, your loved ones will need to apply through the courts to become a 'deputy'. This is a long and expensive process – for example, it costs £365 just to apply to be a deputy. Your deputy may also have to pay an annual supervision fee.
The court process can take several months to conclude, and costs can soon spiral. So, putting an LPA in place can save both time and money.
5. It ensures your finances are completely independent
When you set up a property and financial affairs LPA, your attorney must must keep their finances entirely separate from yours. They must also keep detailed records of any financial decisions they make on your behalf, and the reasons for them.
When you set up your LPA, it’s important to tell your attorney what bank accounts, savings, and investments you hold. This is so, when the time comes, they know who to deal with.
While most attorneys and deputies carry out their obligations to a high standard, there are cases where people have stepped beyond the bounds of their responsibilities.
In exceptional cases this is because an attorney wants to defraud the person of money. However, in most cases, it is simply that the attorney/deputy has not fully understood the extent of their responsibilities and has unknowingly stepped beyond the bounds of what they can and cannot do.
Put the right protection in place
Illness or an accident can happen at any time. As we have seen, it’s vital that you appoint a trusted person who can look after your affairs if you can’t.
But what about any financial support that your family or dependents might need? This is where it’s important to ensure you have the right protection.
For example, Critical Illness cover will provide a tax-free lump sum if you are diagnosed with one of a specified list of illnesses – for example, serious cancer, a heart attack, or a stroke.
Get an online Critical Illness Insurance quote now in just a couple of minutes, and make sure you have the right protection in place.
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