Lasting Powers of Attorney, or LPAs, can be a very useful tool when it comes to future proofing how your finances will be managed. There are a number of good reasons to have an LPA in place, but misunderstandings about them have sprung up too. Steve Wright, our Head of Estates, explores why LPAs are important, and dispels some of the myths surrounding their use.
When it comes to planning what might happen to your affairs if you can’t manage things yourself, many people choose to set up a Lasting Power of Attorney. This important document is a legal tool that grants authority to someone you trust so that they can make decisions on your behalf if you’re unable to do so. There are two types of LPA: one which covers your property and financial affairs, and another which covers your health and welfare, including decisions about your medical care.
Sadly, many people aren’t quite clear what LPAs are, and how they work. A recent survey by Which showed that there is a lack of understanding about the role of LPAs including in what circumstances they can be set up. More than three quarters of those asked believed an LPA could be created at any time, unaware that they’d be unable to do so if their mental capacity had already been lost. Other misunderstandings included how and when bank accounts could be accessed if an LPA had been put into action.
Reasons for setting up an LPA
There are some compelling reasons why an LPA can help with your future planning. With life expectancy increasing, one in three people over the age of 65 will develop dementia. As a result, it’s important to safeguard your finances and health decisions and make sure everything will be properly looked after if you become unable to manage things yourself.
If you don’t have an LPA and lose mental capacity your bank account can’t be accessed to pay for your care. Unfortunately, in this situation, the courts will have to become involved. Also, with no access to your bank accounts your family may be unable to access funds to pay for bills.
Setting up an LPA ensures you decide who you want to act for you. It’s worth noting that your next of kin can’t automatically do so, and the courts may decide to appoint someone else. An LPA also allows you to state your wishes, including any circumstances in which you would want your home or other property to be sold, or your preferences for medical treatment.
Misunderstandings about LPAs
There are a number of myths that surround LPAs which are important to properly dispel. Some of these concern the power that your chosen attorneys have over your affairs. Rest assured that your LPA can’t be used to change your Will – only you or the courts have the ability to do this. Alongside this is the fact that your LPA can’t be used to spend your money or give it away; there are very clear rules about what limited gifts can be made with an LPA in action. An important point to note is if you already have an Enduring Power of Attorney, this will only cover financial and property decisions but will have nothing to do with your healthcare, so you’ll need to set up an LPA for health and welfare to ensure all bases are covered.
Some people are concerned that as soon as an LPA is in place they’ll relinquish some of their control. But there’s no need to worry, you can still look after your affairs whilst you have the mental capacity to do so, or until you ask for your LPA to be enacted.
Finally, don’t worry that who you appoint has long-term power over your estate. LPAs have a ‘shelf life’ – they can’t be used after your death. At this point your Will takes over, and your Executors will manage your affairs.
Setting up an LPA offers peace of mind that your finances and healthcare decisions will be properly managed if you can’t look after things yourself. To talk through the process, please contact your nearest office.