Joshua Croft, Senior Technical Consultant at AJ Bell Investcentre, explains benefits and processes involved in appointing Lasting Power of Attorney and why it is increasingly needed within financial planning.
A Lasting Power of Attorney (LPA) is a legal document that allows an individual (the donor) to appoint someone they trust to make decisions on their behalf if they become unable to do so themselves. This can be an important consideration for clients, as it can provide them with peace of mind that their finances will be managed in the way they would want if they lose the ability to make decisions for themselves. Here are some ways in which an LPA can be useful for your clients:
- Protection against mental incapacity: A client may become unable to make decisions for themselves, such as due to dementia or Alzheimer’s. In this situation, the appointed attorney can make decisions on their behalf, including those related to their finances.
- Peace of mind: Having an LPA in place can give clients peace of mind their finances will be managed appropriately if they become unable to do so themselves. This can provide them with security and comfort, knowing that they have taken steps to protect their future.
- Avoiding court intervention: If a client becomes unable to make decisions for themselves, and there is no LPA in place, the court may need to step in and appoint a deputy to manage their finances. This can be time-consuming and costly. An LPA allows clients to appoint someone they trust to make decisions on their behalf, avoiding the need for court intervention.
- Flexibility: An LPA allows clients to choose who they would like to appoint as their attorney and can be tailored to their specific needs and requirements. This means they can choose someone who understands their financial situation and will make decisions in their best interests.
Before appointing an attorney, it’s important clients understand the key details of an LPA.
- Types of LPA: There are two types of LPAs: one for property and financial affairs, and another for health and welfare. The property and financial affairs LPA allows the attorney to make decisions about an individual’s property, finances and other assets. The health and welfare LPA allows the attorney to make decisions about an individual’s personal care and medical treatment.
- Appointing an attorney: An individual can appoint one or more individuals to act as their attorney, and may be given the power to act either jointly or jointly and severally. They can also appoint replacement attorneys who will take over if their original attorneys are unable to act for them. An attorney must be over the age of 18 and have the mental capacity to make decisions.
- Mental capacity: The individual must have mental capacity to make an LPA. This means that they understand the nature and effect of the document and are able to make decisions about their own affairs.
- Registering the LPA: Once the LPA is complete, it must be registered with the Office of the Public Guardian (OPG) before it can be used. This involves submitting the LPA to the OPG along with the required fee (currently £82) and can be done at any time.
- Using the LPA: The LPA can be used from the point it is registered. It is important to note that if the individual still has capacity to make their own decisions they can continue to do so after the LPA has been registered, and the attorney can only act on their behalf if the individual allows them to.
- Certifying copies: There are specific rules on how copies of LPAs are certified and by whom, which can be found in Section 3 of the Powers of Attorney Act 1971. A copy can only be certified as an original by the donor themselves, a solicitor, a notary public or a stockbroker. It’s worth noting this list does not include regulated financial advisers.
- Supervision by the OPG: The OPG can supervise the attorney’s actions and can take action if they believe that the attorney is not acting in the individual’s best interests.
- Revoking the LPA: The individual can revoke the LPA at any time while they have the mental capacity to do so. They can also make changes to the document, as long as they have the mental capacity to do so.
In conclusion, an LPA can be a useful tool to recommend to your clients. It can ease the burden on their loved ones without the costs and delays of court intervention. By considering an LPA as part of their overall financial planning, clients can ensure their finances will be managed in the way they would want if they become unable to make decisions for themselves.
