There are few certainties in life, but as American statesman Benjamin Franklin famously wrote, two things we can be sure about are “death and taxes”. Yet planning for our ultimate demise, or our decline along the way, is something that we frequently ignore and put off for another day.
It gets put off because thinking about death is difficult and complicated, or because of worries about the costs involved, or because people imagine there is no need.
Recent research[1] found that 42% of adults in the UK have not spoken to anyone about what should happen to their estate when they die, and a quarter of those surveyed said it was too morbid.
When questioned about their later life planning, around a fifth of those aged over 55 said they weren’t dealing with the issue because they had no concerns about what happened when they had gone.
The necessity of having a Will
But without a will, you can’t make sure that your family will be cared for in the way you would wish. There is a persisting myth that a ‘common law’ partnership will provide security for couples who have not gone through a marriage or civil partnership ceremony. But in fact, without a will nothing would go to the surviving partner, it will all pass to children, or if there are no children, then it will go to family, such as parents or siblings.
So, if you’re not married and have significant assets such as property in sole names, then a will really should be top of your list. It’s also particularly important where there is a second marriage, with children from previous relationships.
The other vital element of this future planning is to think about who would manage your affairs and make decisions if you have an illness or accident that leaves you incapable of looking after things yourself.
Understanding Lasting Power of Attorney – LPA
Again, no one wants to think about how they may potentially lose themselves or a close relative to dementia, but the statistics force us to face up to the reality, one in two of us will be affected by dementia in our lifetime, either by caring for someone with the condition, developing it ourselves, or both. And the number of people living with dementia in the UK is predicted to exceed 1.5 million[2] by 2050.
Another common fallacy is that there is an automatic right for spouses, civil partners or children to look after finances when someone loses mental capacity or becomes unable to deal in person. But there is no such right – the only certain way that relatives or trusted friends can handle your affairs is to sign a Lasting Power of Attorney while you are mentally capable and to register it with the Office of the Public Guardian. The alternative is that the Court of Protection will appoint deputies, and the deputy may be someone who does not know the individual. Applying for a deputyship is an onerous process that is best avoided, and it is often the only remaining option for relatives who have not been appointed as attorneys under a Lasting Power of Attorney (LPA) to deal with the affairs of their loved ones.
An LPA is a document by which someone can give another person legal authority to make decisions and act on their behalf. It can be used when someone has become mentally incapable of handling matters themselves or if they want someone to act when they have issues in dealing with matters in person.
As a legally binding document, recognised by banks and other financial institutions, an LPA for property and finance allows the person appointed to make financial decisions on behalf of the individual if they are unable to make those decisions themselves, running bank accounts and paying bills as well as managing property, pension, taxes and investments. For those who are self-employed or a company director, an attorney can be appointed under a separate LPA limited to business matters.
In contrast, a health and welfare LPA cannot be used until mental capacity has been lost. It covers matters such as where someone lives, decisions on medical care and consenting or refusing life sustaining treatment.
Anyone over 18 can set up an LPA, and at any point during their lifetime, as long as they have ‘mental capacity’ to make the decisions involved in drawing one up. The person appointed to act is known as an attorney and will often be a family member or friend who is available to help manage day-to-day affairs. Professionals can also be appointed as attorneys if there is no suitable friend or family member.
While vital for the vulnerable and those who are housebound or unable to conduct their own affairs, a financial property and financial affairs LPA can be used as soon as it has been registered, as long as the person who granted the LPA agrees. This means they are equally useful if an individual is regularly out of the country and wants someone to act for them while they are away, or for a person suffering from physical disability, or where someone has all their faculties but does not want to have to deal with everything themselves.
The process of applying for an LPA has become much simpler since an online system was introduced a few years ago, but there is concern about the impact of a dramatic rise in the number of lasting powers of attorneys submitted for registration, leading to huge backlogs and delays.
Figures from the Office of the Public Guardian, the government body responsible for registering lasting powers of attorney, reveal in their latest annual report that the number of applications rose to 1,073,032 applications in the year reported. This surge in applications and the resulting delays reflects a continuing catch-up from the Covid pandemic when just 691,746 were made in the year 2020/21.
It’s worrying to see the delays, as without an LPA in place it is much more difficult for anyone to step in and manage affairs once someone has lost mental capacity. The only option is to go through the slow and costly process of applying for permission to act on someone’s behalf through the Court of Protection – this process is also affected by delays of many months, and even when a Court-appointed deputy is in place, actions by the deputy may have to be approved by the Court.
The other alarming statistic is the rise in the number of applications being rejected by the OPG, often because individuals have drafted their own terms or permissions, and these are outside those allowed.
An LPA is an essential element of lifetime planning and it’s the only way you can be sure that someone of your choice is able to deal with your affairs and make decisions for you. But these are critical documents so it’s important to get professional advice and build in the right protections from the outset. Expert knowledge can ensure you have an LPA that reflects your wishes and protects against possible financial abuse.
There may be uncertainty ahead, but the two certainties you can control are how your assets are handled when you can’t manage them yourself and ensuring that inheritances are secure and go to those you care about.
So, to paraphrase Benjamin Franklin, “nothing is certain, except your Will and your LPA…!”.
Three steps to LPA confidence
Choose attorneys carefully:
An attorney has far-reaching powers and problems are likely to arise if they do not appreciate the role they are undertaking, or if there are insufficient checks and balances in the process. Before appointing an attorney, think about how well they look after their own finances, how well you know them and how sure you are that they will make the right decisions for you.
Make attorneys accountable:
You can appoint two attorneys and require that they are both involved in each decision, although that can make transactions more complicated. One option is to appoint a professional attorney to undertake regular checks on your attorneys. Alternatively, you can include a requirement within the LPA for the attorney to consult with a third party if a decision exceeds a given threshold or for specific assets. Importantly, every attorney should be made aware that they must not benefit from their position or use money or property for their own benefit, whatever their relationship.
Give attorneys good guidance:
Every attorney needs guidance to help them understand their fiduciary and statutory responsibilities, and how to satisfy them, at the outset, including how they should consult with the person they are representing. They should be encouraged to seek expert advice, whether legal, financial or otherwise, whenever necessary.