As the last few years have shown us, ill health can strike at any time. If you’re injured in an accident, or you’re diagnosed with a serious illness and have to spend an extended period in hospital, it’s likely your loved ones will need to administer the household finances.
It’s a subject that you may have heard TV presenter, Kate Garraway, discuss over the last year or two. Kate’s husband, Derek Draper, has spent many months in hospital and bed-ridden after contracting Covid, during which time the TV anchor had significant problems managing the couple’s finances – much of which was in Derek’s name.
There is one simple document that you can put in place that enables people you trust to manage your finances on your behalf if you’re unable to.
However, recent research published by the Evening Standard has revealed that less than half (41%) of married couples have a Lasting Power of Attorney (LPA) in place, including 30% of same-sex married couples. There’s also confusion among many people as to how an LPA can be used.
Read on to find out why you should ensure you have an LPA in place now, and the valuable benefits it can offer.
Just 2 in 5 married couples have a Lasting Power of Attorney in place
While the Standard research shows that around three-quarters (74%) of people believe that an LPA is important, only around 2 in 5 married couples have such a document in place.
Additionally, 1 in 3 people feel they do not understand how an LPA can be used, despite having heard of it.
Essentially, an LPA allows you to nominate trusted people – family members, friends, business associates, or a professional person – to manage your financial affairs in the event that you lose capacity, or you’re no longer in a position where you want to manage them.
There are lots of reasons why you may need someone to administer your finances. Perhaps you are:
- Injured and have to spend a period in hospital
- Diagnosed with a condition such as dementia or Alzheimer’s and you can no longer manage your own affairs
- Diagnosed with a serious illness and want to focus on your recuperation and recovery.
The key thing to remember is that you are only able to put an LPA in place while you have mental capacity. If you’re unconscious after an accident, for example, or you’re diagnosed with dementia it is too late to sort out your LPA.
A common myth is that you give up control of your finances as soon as you create an LPA. Typically, this is not the case, as you maintain control of your affairs for as long as you have mental capacity.
So, as you never know what is around the corner, it is a step you should take as soon as possible. Here are three important benefits of putting an LPA in place.
3 important benefits of an LPA
- Peace of mind that your affairs will be administered by a trusted person
Without an LPA, no one will be able to immediately deal with your bank or credit card accounts, mortgage payments, investments or savings if you can’t.
Appointing someone that you trust to deal with these issues means that you have future-proofed your affairs while you still have the mental capacity to do so.
You can choose different attorneys with specialist knowledge – for example, you may choose a co-director to make business decisions and a family member to look after your household finances.
You can also apply restrictions on the types of decisions your attorney can make if you want to.
Without an LPA, your next of kin may have to apply to the Court of Protection to appoint a deputy. This could take time, and the deputy may end up as someone you may not otherwise have chosen.
- Your attorney can take over your affairs straight away
Applying to the Court of Protection can be expensive and take several months. This could lead to delays when it comes to administering your affairs.
If you have an LPA, your attorney can begin to take control straight away. It can mean you don’t go into arrears on regular payments, and ensures they can manage your assets appropriately.
- Easy and simple to set up
Setting up an LPA is straightforward and can be cost-effective. Many solicitors offer a service where they can help you to create a watertight LPA – and your financial planner can also help provide guidance.
There are two types of LPA:
- Financial LPA – this enables your attorney to look after your finances, which may include paying your mortgage and bills, managing investments and savings, or dealing with your state benefits and insurance. Remember that an attorney can also make these decisions for you if you still have mental capacity but do not want to.
- Health and care LPA – this enables your attorney to make decisions about your care, such as where you live, any medical treatment, and your diet. The health and care LPA can only be used when you lose mental capacity.
Overlooking an LPA can leave you in a vulnerable position just at the time you need a trusted person to help you the most. So, if you haven’t yet set this up, don’t wait until it is too late – set yours up now.
Get in touch
If you would like to discuss LPAs or ensuring your wealth is protected if anything happens to you, please get in touch.
Please email hello@sovereign-ifa.co.uk or call 01454 416653 to find out how.
Please note
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
