Why Everyone Over 40 Needs a Lasting Power of Attorney (LPA)

By: Tim Bennett

Many people fail to set up an LPA or leave it far too late. This week I explain why this can be a big mistake.

I recently asked Trustee Services Executive, Bob Bullamore, what age someone should be to set up a Power of Attorney, as part of an interview for the Summer Edition of Confidant. This is what he said in reply;

“I used to say “by the age of 50”, however, one very sad situation we dealt with recently made me rethink that. An estate was divisible three ways, between a deceased father’s three daughters. Unfortunately, one of them became very ill around the time her father died. She was only in her 40s yet she died two years later. Because she was relatively young and had never had much money of her own, she had not created a Power of Attorney. That meant we couldn’t distribute her part of the estate. In the end, her surviving husband had to apply to the Court of Protection to be appointed as her Deputy. That may sound simple but in reality it’s a time-consuming, costly and inflexible process that took over a year to complete. By contrast, a Lasting Power of Attorney (LPA) covering Property and Financial matters takes effect immediately, once it’s been registered with the Office of the Public Guardian. The conclusion? It is never too early to set up an LPA.”

So, in this article I take a look at LPAs and some of the common pitfalls to watch out for when setting one up.

The nuts and bolts

There are two types of Power of Attorney – one deals with Health and Welfare and the other Financial and Property matters. However, the broad aim is the same: you are creating a document that allows someone else to act on your behalf should you be either incapable of doing so through, for example, ill-health (with regards to Financial and Property LPAs), or you would simply prefer them to, where perhaps you are based in a different legal jurisdiction to your UK assets. Here is a summary of some the key issues that each one may cover;

Who can create one?

The most important thing to realise here is that, aside from being 18 or over, you need to have full mental capacity at the time the LPA is created and registered. Otherwise, should something happen to you – perhaps an accident – your spouse and/or relatives could be left powerless to make key decisions. Whilst they can secure the authority they need through the Court of Protection, the process can be time consuming and stressful. Once an LPA is registered on the other hand, it can be activated straight away, in the case of financial and property matters, provided it is set up correctly.

What is the process?

Although easier than it used to be, since the forms are now available online, there is still plenty to do and quite a few people that need to be involved in the process, as follows;
Because this is such an important document, it requires signatures from witnesses as well as the person creating the LPA and also any nominated attorney/s. Bear in mind that acting as an attorney for a close relative can be emotionally draining so you should give some thought as to whether you want to nominate an independent third party – it does not necessarily have to be a family member. Then, the whole thing needs to be registered with the Office of the Public Guardian to be legally effective.

Who can be my attorney?

This needs careful consideration since the person/s you nominate will be potentially required to make very important decisions on your behalf.

Where you appoint more than one attorney you will also need to decide whether they can act independently (“jointly and severally”) or need to act in concert (“jointly”). This isn’t always clear cut – although someone may think they’d prefer, say, two children to act jointly, if those children don’t get on well, then the decision may create a big headache at the point the LPA activates.

Furthermore, you need to decide when an LPA will activate. For health and welfare matters, the law requires that you are deemed incapable of making your own decisions, usually by a doctor. However, for a financial and property LPA you can opt for it to activate immediately, where for example you want someone else to be able to take decisions for you about property, investments, your bank accounts or anything else.

Here are some guidelines;

In summary

Setting up an LPA successfully is quite a lengthy process involving some important decisions and a fair amount of administration. For that reason it is a document that many people leave until too late to set up. Please speak to your Investment Manager to find out more about these important documents. You may also wish to watch the video that accompanies this article.