Why setting up an LPA makes sense
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When clients come to us to discuss their financial plans for retirement, we always ask them if they’ve considered taking out a Lasting Power of Attorney (LPA) as not having one can cause many issues when trying to assess funds – particularly for a partner.
According to figures for the end of 2016, less than 4% of the adult population of the UK have set up an LPA.
An LPA enables an adult who has mental capacity (the donor) to choose another person (an attorney) to make decisions on their behalf. The two types of LPA are a Property and Financial affairs LPA (for decisions about finances, such as selling the donor's house, managing their savings and investments), and a Health and Welfare LPA (for decisions about both health and personal welfare, such as where to live, day-to-day care or medical treatment).
LPAs are important. Many married couples wrongly assume that they can make decisions if their partner loses capacity. But, without an LPA, there is nobody – not even next-of-kin - who has an immediate right/duty to manage an individual’s affairs.
When it comes to accessing retirement funds, i.e. flexi-access drawdown and stocks & shares ISAs, if a person loses capacity then, without an LPA in place, their spouse can’t automatically assess funds. This could leave an individual or a couple in financial difficulties.
An LPA can be vital if you hold joint assets, as the assets may not be able to be sold without a court order appointing a ‘deputy’ if you lose your mental capacity without a valid LPA. Anyone over 18 can apply to become a deputy, providing nobody objects to their application and they have the necessary financial experience if they’ve applied to be a ‘Property and Financial affairs’ deputy.
A deputy’s powers are much more limited than those of an attorney who has been appointed under an LPA and they must pay an annual fee to renew their deputyship.
Obtaining an LPA or equivalent is a straightforward and inexpensive process which makes the current low take-up especially strange.
Many people who have obtained an LPA often do so because of the increasing number of people around us living with dementia and the worry that they too may eventually lose the ability to make key life decisions. In that situation, most of us would prefer that somebody we trust could step in and make those decisions for us.
According to figures from the Alzheimer’s Society, there are currently 850,000 people with dementia in the UK, with numbers set to rise to over one million by 2025 and two million by 2051. This year, 225,000 people will develop dementia. And while it is something that, in the main, affects older people – there are currently 40,000 people under 65 with dementia in the UK.
But dementia isn’t the whole story when it comes to LPAs, every year there will be people who experience accidents or sudden illnesses, which unexpectedly leave them unable to look after their affairs.
If you’ve got any questions, then give our team a call on: 01892 500600.