We examine the importance of lasting powers of attorney when managing your financial affairs

The prospect of suffering cognitive and physical decline is a less cheery aspect of later life – the impact on both you and those around you can be devastating. You may need to enlist the support of friends and family members to help you complete everyday tasks – such as eating, washing, and paying utility bills – previously taken for granted.

Sadly, health problems, particularly in retirement, are far more common than you may assume. Mortality data shows that while average life expectancy for UK males and females is 79 years and 83 years, respectively, healthy life expectancy – the number of years an individual is expected to live in self-assessed good health or very good health – is 63 years1.

Although you have little influence over how and when ill health may occur, you can control who is appointed to look after your affairs should you become incapable of doing so yourself. By taking out a lasting power of attorney (LPA), a trusted friend or family member can step in, alleviate the burden, and manage your affairs for you.

Here we outline what an LPA is and why having one in place is imperative to managing your financial affairs, especially those of you with discretionary managed portfolios.

So, what is an lPA?

In short, an LPA is a legal document that lets you (the donor) appoint one or more people (attorneys) to help you make decisions or to make decisions on your behalf. It allows others to take control at a time when you need it most. Currently, there are two types of LPA: health and welfare, and property and financial affairs. If you live in Scotland, these are known as welfare power of attorney and continuing power of attorney, respectively.

You can apply for either one or both and each LPA must be registered with the Office of the Public Guardian at a cost of £82, taking total costs to £164 if you wish to register both.

Discretionary Managed Portfolios under an lPA

Under a property and financial affairs LPA, or continuing power of attorney for those living in Scotland, attorneys can make investments on behalf of someone else. However, for those of you with discretionary managed portfolios, there is an important point to consider: you must make sure that you “do not delegate decisions to an investment fund manager unless you have permission within the LPA”2.

What this means is that the LPA must include suitable wording, making it clear that your designated attorneys have the power to manage and invest your money on a discretionary basis. In the absence of such wording, you may need to apply to Court of Protection to obtain the necessary investment powers, a potentially unenviable situation as the section below highlights.

Consequences

LPAs must be signed while you still have mental capacity and if you lose mental capacity without one in place, your loved ones will need to apply for a Deputyship order at the Court of Protection in order to manage your affairs. This process takes around four to six months and costs roughly £400 plus legal fees, which can quickly mount up. In addition, no one will be able to act for you while the application is awaiting approval. For example, should you need to start drawing an income from your discretionary managed portfolio to cover the costs of moving into a care home, your loved ones would be powerless to arrange this on your behalf until the Deputyship is rubber-stamped. This could create a sizeable problem, especially if your cash requirements are immediate. By arranging a joint meeting with your [insert local firm] financial planner and your solicitor to discuss your individual LPA requirements you can ensure that such a situation is avoided.

How many attorneys can you appoint?

Well, the short answer is as many as you like, but there’s real merit in keeping things simple, and so in most cases, attorney numbers range between one and four. In terms of who you should appoint, it’s crucial to select those who you trust to carry out your wishes. In most cases, this will be family and friends, sometimes even solicitors, but there really is no hard and fast rule – you are free to choose who like. If you’re unsure, we would urge you to seek legal advice.

Once named, the attorneys can act either:

Fit for the future

There was some positive news on the LPA front recently, with the announcement that the application process is set to be modernised. A new consultation launched in July by the Ministry of Justice will examine the entire process of creating and registering an LPA, with the chief aim of making the service fully digital. It also strives to boost the Office of the Public Guardian’s powers to prevent fraud and abuse of the LPA system by making the process safer and simpler.

Should I take legal advice?

It is possible to download the relevant forms from the Office of the Public Guardian and complete them yourself. However, while there’s no requirement to take legal advice when setting up an LPA, it might save you problems down the line. As this article serves to highlight, LPAs are a complex area of financial and legal planning, and taking professional advice will guide you through the process and the pitfalls. We here at [inset local firm] are happy to arrange a meeting to discuss your LPA needs and have professional relationships with local solicitors to ensure that people you trust can step in to manage your affairs in the event of you becoming incapable of doing so yourself.

1ONS – https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies

2Gov.uk – https://www.gov.uk/guidance/investing-for-someone-as-their-attorney-or-deputy

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Contact Information

+44 203 148 8810
hello@iwpuk.co.uk

Opening Hours

Monday – Friday 9am-5pm 
Weekend – Closed

Address

7 Stratford Place, Marylebone, London, W1C 1AY

Get In Touch

Fill in the form below and our team will be happy to assist you

Contact Information

+44 203 148 8810
hello@iwpuk.co.uk

Opening Hours

Monday – Friday 9am-5pm 
Weekend – Closed

Address

7 Stratford Place, Marylebone, London, W1C 1AY