Do you need a Lasting Power of Attorney (LPA)?
A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint people to help you make decisions on your behalf, either when you are unable to do so, or for convenience. Most people do not realise that without an LPA in place, your loved ones will be unable to manage your finances or business interests until an expensive Court Order is obtained.
Thinking about, or talking about your death or losing mental capacity is not easy – but how would the situation look if you suffered a serious illness (such as dementia) and not planned ahead?
Most people are aware of the fact that a Will is a legal document that deals with your assets when you pass away, but have you ever considered who will manage your affairs if you are unable to do so yourself due to an accident or illness during your lifetime?
If the worst were to happen and there’s no power of attorney in place, someone would need to apply to the Court of Protection to obtain a Deputyship Order on your behalf. This is an expensive and lengthy process and the applicant may not be the person you would have chosen to manage your affairs on your behalf.
A lot more detail is required for a Deputyship Order application and your accounts will be unable to be accessed for some months until the Court’s Order comes through. For business owners, having the company bank accounts effectively frozen can be disastrous. With no funds available, most businesses will fail and your colleagues and loved ones may find themselves in financial turmoil. Bear in mind also that, until things get sorted out, no one will be able to monitor the actions of your joint account holder in the way that you might have previously done. As such, there is the further risk of unwise financial decisions being made, or worse still, the risk of fraud or abuse.
What are your options?
Drawing up LPAs allows you to appoint a person or people who you trust and who you think will be most suitable to manage your affairs. There are two types of LPA:
- Property and Affairs
- Health and Welfare
What is a Property and Affairs LPA?
A property and affairs LPA deals with decisions about your finances and property such as paying bills, collecting income or selling property. This document can be used immediately for convenience, or only if you lose mental capacity.
A separate LPA may also need to be put in place to deal with your business, as the attorney appointed to deal with personal finances may not be suitable to also deal with your business. This is something that should be discussed with your business partners.
Most limited companies adopt the Companies (Model Articles) Regulations 2008 which contain provisions allowing the removal of directors who lack mental capacity. However, the Mental Health (Discrimination) Act 2013 amended these regulations so that a person does not cease to be director if he loses mental capacity, and attempts to remove him may be found to be discriminatory. Accordingly, in order to protect the company’s interest and avoid discrimination claims, directors should execute a business LPA.
What is a Health and Welfare LPA?
A health and welfare LPA deals with decisions regards your day-to-day care, where you live and life sustaining treatment. This LPA can only be used if you lose mental capacity and is important to ensure that someone else can step into your shoes and speak for you, especially if you have strong wishes regarding medical treatment.
Whilst LPAs appoint appropriate persons to deal with your affairs while you are still alive, your Will appoints persons to deal with your estate when you pass away. Wills are also important to appoint guardians for minor children, allow gifts of specific and personal items, separate out assets such as businesses (if so required) and protect the family’s wealth from the impact of inheritance tax and care home fees.
Even though a will is an incredibly important document, the majority of adults still do not have one. However, dying without a will can direct assets to people you would rather not be beneficiaries. It can also present serious problems with the ownership of property and, for business owners, how your co-directors might manage your company.
We’re here to help
If you would like to draw up your Wills and LPAs, you should speak with a will writer or solicitor.
IEP Financial can put you in touch with our trusted contacts as well. Whomever you instruct, do make sure that they are experienced, regulated and adequately insured to meet your (and your beneficiaries’) needs.