Is making a “Lasting Power of Attorney” on your financial to-do list?
More people in the UK are using Lasting Powers of Attorney (LPA) to ensure their affairs are looked after when they’re not able to manage their finances or make decisions about their health and welfare.
Last year just over 800,000 LPA’s were taken out in England and Wales.
However, many LPA’s still fail to provide the protection required. Too many of us think that all that all we need to do is fill in an online form and get it signed by a relative who agrees to look after our affairs when we can no longer do so.
However, taking on Lasting Powers of Attorney involves learning new skills of management and negotiation. You may need objective advice from someone who knows who has successfully managed another person’s affairs.
Many first-time attorneys fail at the first hurdle — registering the document with the Office of the Public Guardian. It is best not to wait until help is needed, as registration can take up to 12 weeks.
Attorneys who do not do their homework can face costs of many thousands of pounds and in extreme cases can be prosecuted for exceeding their powers.
In most cases this can be because they do not understand their responsibilities. In other cases, Attorneys have turned out to be “downright nasty.”
Too many people who take on the role of attorney never take advice about what they can, and can’t, do as Attorneys. Sometimes the document won’t allow for basic permissions which only a trained professional would include when drafting LPA’s. Attorneys often can get in a tangle with siblings and other relatives.
Everyone should take advice before they start acting for the person who has appointed them. If they get it wrong, they can be liable for [costs of] tens of thousands of pounds.
First, financial attorneys should check the Will of the person for whom they are acting, to make sure they do not dispose of assets that are the subject of bequests. I have seen cases where attorneys have used money specifically set aside for grandchildren for everyday expenditure. The result was the regular spending was reducing the grandchildren’s inheritance against the original wishes of the grandparent.
Financial attorneys also have a fiduciary duty to make sure that their relatives’ money is invested correctly to get the best return. If grandma has all her money in savings accounts earning poor interest rates, the attorney should take advice on how to improve her return. However, without a professionally drafted LPA, attorneys will be unable to instruct a professional to manage the assets.
Attorneys need to get a feel for the assets and liabilities and to assess whether the older person needs care in a home or help at home. They need to draw up a budget to make sure the assets last for the life of the older person. They may also need to help with the claiming of benefits. They may need to cancel subscriptions or make sure the older person is not paying too much for insurance or other services.
When it comes to Inheritance Tax Planning, attorneys must get authority from the Court of Protection before acting pre-emptively and will need to demonstrate they have taken advice on how to safeguard future inheritances.
An LPA must be taken out by an older person before they lose capacity to deal with their affairs. This can mean that several years pass between the process being agreed and when the attorneys need to take over.
In some cases, there can be a dispute over whether the older person is no longer capable. At that point, a “mental capacity assessment” is needed to establish their mental aptitude. Attorneys need to be in regular contact once the LPA is registered and have an obligation to act if the older person is losing competency.
Often, there is a slow deterioration and there may be a halfway house where the older person continues with some of their financial responsibilities and the attorneys deal with more complicated ones.
Things can go wrong when the attorneys decide it will be easier to take over everything because it is quicker to do so than to discuss everything with their aged relative.
Just because they make an unwise decision, or one the attorney doesn’t agree with, does not mean they have lost capacity.
It may be possible for an older person to look after some of their own money by retaining a simple bank account so that they can treat themselves occasionally and pay their own way with their family at Christmas or birthdays. This helps them keep a degree of independence and self-respect.
At the outset, the person appointing an attorney to look after their affairs needs to consider if their choice of attorney has the appropriate skills. One relative might be able to cope with the responsibility for health and welfare better than looking after the money and property. They also need to think about how many attorneys they need. One appointed attorney may become incapacitated, move away from the area or die. Two attorneys can help each other and discuss decisions.
Taking on the role of attorney is a big responsibility. Attorneys should look after the affairs of their relative or friend as they would look after their own — or hope theirs would be looked after if they lost capacity.