Taking Control of Tomorrow: Why You Need a Financial Lasting Power of Attorney Today
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. You should always seek professional advice from an appropriately qualified adviser.
All contents are based on our understanding of current legislation, which is subject to change, any information provided here is only correct at the time of posting.
The Financial Conduct Authority do not regulate will writing, loans, credit cards or some forms of mortgage, tax advice, offshore investments and estate planning.
As financial advisers, we spend much of our time emphasising the importance of planning for the future. While we often focus on investment strategies and retirement plans, there's another aspect of financial planning that often gets overlooked but is equally crucial: Lasting Powers of Attorney (LPA). According to the Office of the Public Guardian (OPG) it was estimated that only 22% of UK adults have LPAs in place. In this post, we will explain what LPAs are, why they are essential for your financial well-being, and the potential consequences of not having one in place.
What is a Lasting Power of Attorney (LPA)?
A Lasting Power of Attorney is a legal document that allows you to appoint someone to make decisions on your behalf if you become unable to do so yourself due to illness or incapacity. There are two main types of LPAs:
1. Health and Welfare LPA: This LPA allows your chosen attorney to make decisions about your healthcare and personal welfare, such as medical treatment and where you live.
2. Property and Financial Affairs LPA: This LPA grants your chosen attorney the authority to manage your financial affairs, including paying bills, managing investments, and selling property.
The focus of this blog will primarily be on the Property and Financial Affairs LPA, as it directly impacts your financial stability and security.
Benefits of Having a Property and Financial Affairs LPA
1. Financial Management Continuity: Life is unpredictable, and unforeseen circumstances such as illness or accidents can disrupt your ability to manage your finances. Having a Property and Financial Affairs LPA ensures that someone you trust can step in and handle your financial affairs seamlessly, ensuring bills are paid, investments are managed, and assets are protected.
2. Protection Against Financial Abuse: Unfortunately, instances of financial abuse and exploitation are not uncommon, especially among vulnerable individuals. By appointing a trusted attorney through an LPA, you can safeguard yourself against potential financial exploitation, as your attorney will have a legal duty to act in your best interests.
3. Avoiding Delays and Court Involvement: Without an LPA in place, if you were to lose mental capacity, your loved ones would have to apply to the Court of Protection to obtain the authority to manage your finances. This process can be time-consuming, expensive, and emotionally draining, causing unnecessary delays in critical financial decisions.
4. Preservation of Privacy and Dignity: Without an LPA in place, if you were to lose mental capacity, your financial affairs could become subject to public scrutiny through the Court of Protection. This lack of privacy not only exposes your financial details but also erodes your dignity during a vulnerable time. By appointing a trusted attorney through an LPA, you maintain control over who has access to your financial information, preserving your privacy and dignity.
5. Facilitation of Long-Term Financial Planning: A Property and Financial Affairs LPA isn't just about managing day-to-day finances—it's also about long-term financial planning. Your chosen attorney can make decisions on your behalf that align with your financial goals and aspirations, ensuring that your wealth is managed in a way that supports your future needs and objectives. Whether it's making strategic investment decisions or planning for retirement, having an LPA in place enables continuity in your financial planning journey, even in the face of unexpected challenges.
Drawbacks of Not Having a Property and Financial Affairs LPA
To illustrate the consequences of not having an LPA in place, let's consider an example:
Meet Sarah, a successful business owner in her early 60s. Sarah has always been diligent about managing her finances and has built a comfortable nest egg for her retirement. However, tragedy strikes when Sarah suffers a severe stroke, leaving her unable to communicate or make decisions for herself.
Prior to her stroke, Sarah had not put an LPA in place, assuming that her family would be able to manage her affairs if needed. However, without a legal document granting them authority, Sarah's family finds themselves in a difficult situation. They are unable to access her bank accounts, pay her bills, or make decisions about her business interests.
As a result, Sarah's finances begin to suffer. Bills go unpaid, investments remain unmanaged, and assets are left vulnerable. Sarah's family is forced to navigate the complex and time-consuming process of applying to the Court of Protection for deputyship, causing further stress and anxiety during an already challenging time.
Meanwhile, Sarah's business, which was once thriving, begins to falter due to lack of oversight and management. The emotional toll on Sarah's family is immense. Not only are they grappling with the shock and uncertainty of Sarah's condition, but they are also burdened with the responsibility of managing her affairs without the necessary legal authority.
Conclusion
In conclusion, the importance of putting in place a Property and Financial Affairs LPA cannot be overstated. It provides peace of mind knowing that your financial affairs will be managed according to your wishes by someone you trust, should you ever become unable to do so yourself. Don't wait until it's too late—take proactive steps today to safeguard your financial future and protect your loved ones from unnecessary hardship.
It's imperative to seek professional advice from suitably qualified individuals. While LPAs can be created without legal assistance, the legal and financial implications involved necessitate expert guidance. Investing in professional advice upfront can provide peace of mind and mitigate the risk of challenges or disputes down the line.