Most people understand the importance of making a Will, even if they have not set one up yet. It gives peace of mind that your wishes will be followed after your death and that your loved ones will know what to do.
What is less well understood is what happens if you are still alive but lose the ability to make decisions for yourself.
Illness, dementia, stroke, a serious accident or another unexpected event can leave someone unable to manage their finances. Without the right legal authority already in place, even a husband, wife or adult child cannot simply step in and take over.
In our previous blog, “Why a Will Is Not Enough: The Importance of Lasting Powers of Attorney,” we looked at why everyone should consider putting LPAs in place alongside a Will. In this article, our private client team focuses on one of the most important types of LPA: the Property and Financial Affairs Lasting Power of Attorney, how it works, and what can happen if you do not have one.
What Is a Financial Lasting Power of Attorney?
A Property and Financial Affairs Lasting Power of Attorney (LPA) allows you to appoint one or more people you trust to make financial decisions on your behalf if you are unable to do so yourself.
Your chosen attorneys can deal with matters such as:
- Managing your bank and savings accounts
- Paying household bills and care fees
- Collecting pensions and benefits
- Managing investments
- Buying or selling property
- Handling tax affairs
- Dealing with everyday financial administration
You decide who acts for you and how they should make decisions. You can also include instructions or preferences to guide them.
Importantly, an LPA must be made while you still have mental capacity.
LPAs must be registered with the Office of the Public Guardian (OPG) before they can be used.
Unlike a Health and Welfare LPA, which only comes into effect if you lose mental capacity, a Property and Financial Affairs LPA can be used as soon as it is registered, with your permission.
What Happens If You Don’t Have an LPA?
This is where many families encounter lengthy and expensive difficulties.
There is a common misconception that a spouse or close family member can automatically manage someone’s finances if they become unwell. In reality, that is rarely the case.
Banks, investment providers, and other financial institutions cannot simply give relatives access to someone’s accounts just because they are next of kin.
Without a valid Financial LPA, your family may find themselves unable to:
- Access bank accounts
- Pay bills or mortgage payments
- Manage investments
- Sell property to fund care
- Deal with pensions or other financial matters
This can create significant practical and financial problems at a time when families are already coping with the emotional impact of a loved one’s illness.
When Should Families Be Thinking About an LPA?
One of the biggest mistakes people make is assuming there is plenty of time.
Mental capacity can change gradually, as with dementia, or it can be lost suddenly following a stroke, brain injury or serious illness.
A guide published by the Office of the Public Guardian showed that “40% of people who say they are not interested in LPA don’t think they’ll lose capacity, don’t care, or don’t want to tempt fate”. Access the guide here: LASTING POWERS OF ATTORNEY – THE IMPORTANCE OF MAKING THE RIGHT CHOICE.
We often speak to families after concerns have already begun, or notice warning signs such as:
- A parent that is becoming forgetful.
- A loved one who is struggling to keep on top of bills or banking.
- Family members may notice unusual spending, unopened post or confusion over financial decisions.
These conversations can feel uncomfortable, but they are far easier while someone still has the capacity to make their own decisions than after that capacity has been lost.
Putting an LPA in place early gives everyone certainty and allows the individual to decide who they trust to act on their behalf.
Acting Sooner Rather Than Later
A crucial point to remember about a Lasting Power of Attorney is that it can only be made while you have mental capacity. If you wait until you or a family member is already in difficulty, it will be too late. The document must be completed, signed and submitted for registration before capacity is lost, not after.
Registration with the Office of the Public Guardian often takes 8 to 10 weeks to process and register an error free application. That is another reason to act sooner rather than later.
What If Someone Has Already Lost Mental Capacity?
If someone no longer has the mental capacity to make a Lasting Power of Attorney, it is too late to create one.
Instead, an application must be made to the Court of Protection for a Deputyship Order.
A deputy has broadly similar responsibilities to an attorney, but the process is very different.
Applications to the Court of Protection can take many months to complete and involve:
- Court application fees
- Ongoing supervision by the Office of the Public Guardian
- Annual reporting requirements
- Continuing deputy supervision fees
- Additional legal costs in many cases
Unlike an LPA, where you choose who manages your affairs, deputyship means the court decides who will be appointed.
For many families, deputyship becomes an expensive and time-consuming process that could have been avoided by putting an LPA in place earlier.
Planning Ahead Gives You More Choice
None of us likes to think about losing the ability to manage our own affairs. However, planning ahead is not about expecting the worst. It is about making sure that, if the unexpected happens, the people you trust can step in without unnecessary delay, expense or uncertainty.
A Financial Lasting Power of Attorney gives you the opportunity to choose who will manage your finances, rather than leaving those decisions to the Court of Protection.
For many families, it can make an already difficult time considerably less stressful.
Putting LPAs in place is often less about preparing for the unexpected. It is more about ensuring continuity, control, and clarity. For this reason, they should be regarded as a standard part of private client planning, not an optional extra. Read our previous article, ‘Does Everyone Need a Power of Attorney?’, for more on LPA benefits.
Lasting Power of Attorney Solicitors
Whether you are thinking about putting a Lasting Power of Attorney in place for yourself or helping a family member plan for the future, our experienced Private Client team can guide you through the process.
We will explain your options clearly, ensure the documents reflect your wishes, and help you put the right arrangements in place before they are needed. This includes registration with the Office of the Public Guardian. We can also help with other legal matters relating to you and your family, including:
To speak to our friendly, experienced, professional private client solicitors in Uxbridge today, please call 0330 175 5655 or email info@bglaw.co.uk.
