14th September 2021
According to FTAdviser, registrations to make a Lasting Power of Attorney (LPA) have dropped by 23% over the last year.
An LPA is a legal document that enables you to elect a trusted individual or individuals to take care of your finances should you be unable to do so through a loss of mental capacity. This could be because of an accident or illness.
Having an LPA is crucial for the wellbeing of both you and your finances in the event of the unexpected. Anyone over the age of 18 can put an LPA in place, and here are three reasons why you should do exactly that.
A fall in registrations does not reflect a fall in importance
There was a total of 909,000 LPA registrations in 2019/2020, but this number fell to just 695,000 through 2020/2021. The fall is theorised to be linked with the disruption caused by lockdown measures in the UK, meaning those who wanted to apply needed to wait until restrictions eased.
This is especially concerning in relation to the older generations, as they are at the highest risk of incapacitation, especially from Covid-19.
An LPA is there to ensure that your affairs are handled the way you’d want them to be, by someone you trust, if you lose the mental capacity to do so yourself.
As this could happen at any time, as the last 18 months have shown us, it’s important to not dismiss putting an LPA in place as something only older people should do. It’s a key part of anyone’s financial plan.
While an LPA can be made for anyone over the age of 18, you must make one before you lose the conscious ability to do so, in order to protect you against coercion and fraud.
There are two different types of LPA that you can make:
- A Health and Welfare LPA – this will cover your day-to-day life, any medical care you need, and decisions such as whether to move into a care home.
- A Property and Financial Affairs LPA – this will cover the management of your savings and assets, paying bills, and claiming benefits on your behalf.
A Property and Financial Affairs LPA could be vital for your financial planning and could have benefits in the future if the worst were to happen.
1. You have the power to appoint people you trust
An LPA essentially gives you the ability to entrust your financial decisions with someone close to you, should you lose your mental capacity in the future.
If you become unable to make your own decisions, having someone that you’ve elected with your best interests at heart is crucial. An LPA allows you to choose one or more people to control your finances if they are over the age of 18 and have not lost their own mental capacity.
You can also restrict the decisions your attorney can make, allowing you to have even more control over what happens. For example, you could exclude your attorney from deciding what happens with your property, or any other assets you own.
This allows you to also give each attorney different responsibilities, possibly based on their knowledge or experience. For example, if you own a business, you may entrust a colleague or co-owner with decisions related to it rather than a family member with no experience.
It is worth remembering that an LPA cannot be changed once you are incapacitated, so it may be worth considering the long-term effects of any restrictions you impose. An LPA must be set up or changed while you have mental capacity.
2. You could lose mental capacity at any time, so it always pays to be prepared
Becoming unexpectedly incapacitated without an LPA in place could leave your family with unnecessary difficulty. In an already tough time, they will need to apply to the Court of Protection to become a deputy, which can be time consuming, stressful, and expensive.
Not only would you have no say in who gets to be your attorney, but your family would also have to pay up to £365 as an application fee, and there may be other charges further along in the process.
It can often take up to three months before a deputy is appointed, leaving your family without any control over your finances for a long period of time.
With an LPA in place, your attorney can begin managing your affairs without delay, immediately after you become incapacitated. This allows both you and your family to be cared for instantly. Plus, an LPA costs just £82 to register yourself, and will then remain in place for the rest of your life.
If you wanted to register both a Health and Welfare LPA and a Property and Financial Affairs LPA, then it would cost a total of £164.
3. Peace of mind for the worst-case scenario
No one likes to think that they may one day be unable to make their own decisions. But just like creating a will to prepare for after you’re gone, an LPA can help you ensure that appropriate decisions are made should you lose your mental capacity.
Once an LPA has been registered, it will remain in place for life. The peace of mind that could bring you and your family is immense. Everyone can relax knowing that you have chosen the person or people who will take care of your affairs.
It can also be temporary, meaning that you can take back control or edit it once you are able to prove your mental capacity again. This might be useful for those hospitalised for an accident or illness, such as Covid-19.
Get in touch
Want to find out more about how an LPA could benefit you and your finances? Get in touch. Email firstname.lastname@example.org or call 0161 8080200.
The Financial Conduct Authority does not regulate Lasting Powers of Attorney.