From Legal Futures’ Associate Saunderson House.
Alongside ensuring that your Will is kept up-to-date, it is wise to also put in place a Lasting Power of Attorney (LPA). This will ensure that the individuals you trust most are able to make decisions on your behalf, in the event of mental incapacity in the future.
Many without an LPA assume that their family or close friends might be able to easily step in to help as needed, but this is not the case. If you lose mental capacity without an LPA in place, all of your assets will be frozen (even accounts held jointly) while those who wish to make decisions on your behalf apply to the Court of Protection for the legal authority to do so. Applications to the court can take months and are more expensive than simply putting in place an LPA ahead of time, and of course the court will decide who makes decisions for you, not you.
There are two types of LPA, one covering Health and Welfare and the other covering Property and Financial Affairs. These can be put in place at the same time for £164 (plus costs for legal advice, if taken). With your consent, the Property and Financial Affairs LPA can be used immediately, even while you still have mental capacity. For as long as you have mental capacity, you can revoke an LPA at any time.
While clearly you become more likely to lose mental capacity as you get older, it is never too early for adults to apply for an LPA, in case of the unexpected, and a surprising number of our clients (and their families) have benefitted hugely from having LPAs in place ahead of time. More widely, an increasing number of LPAs are being put in place, with over 717,000 new applications in 2017 alone (more than double the number of applications in 2014) and over 3 million LPAs have now been registered since 2007. Applications can be made online here, or using a paper application form.
An LPA gives wide-ranging powers to your attorney (or attorneys), and though attorneys are legally obliged to always act in your best interests, a very small proportion of attorneys have been found to have abused their powers. You should ensure that you have complete faith in those you choose, and consider appointing more than one attorney and asking that they act jointly in all decisions.
Those who already have an LPA in place should also be aware of two developments in recent years:
1. If you might like for their portfolio to be managed on a discretionary basis either now or in the future (meaning that responsibility for day-to-day investment decisions is delegated to a professional portfolio manager), then the Property and Financial Affairs LPA now must include a clause to permit this, which typically reads as follows:
“My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees.”
Such a clause can only be inserted by signing a new Property and Financial Affairs LPA including the clause, if you still have mental capacity to do so, or otherwise by obtaining a court order to retrospectively insert the clause. Therefore, if you would value even just the option of discretionary portfolio management in the future, it is likely to be worth reviewing your existing LPA, to ensure that this still meets your needs.
2. If you applied to register an LPA in England or Wales between 1 April 2013 to 31 March 2017 inclusive, you can claim a partial refund of the cost, further details on which are available here. This also applies to Enduring Powers of Attorney (EPAs), which preceded LPAs.
Further information on LPAs can be found here, and if you have any questions with regard to LPAs, of course please do not hesitate to contact your usual Saunderson House adviser.