Since the Lasting Power of Attorney (LPA) replaced the Enduring Power of Attorney in England and Wales in 2007, around three million have been implemented.
More than 800,000 LPAs were put in place in 2018, a rise of 6% on the previous year. However, experts believe that there are millions of people in this country who should, but don’t, have an LPA. Considering that the Alzheimer’s Society say that more than one million people in the UK will have dementia by 2025, it’s clear that there is still work to be done.
So, what is an LPA? How do they work? And who should have one? We answer these questions and bust five myths about a Lasting Power of Attorney.
What is a Lasting Power of Attorney (LPA)?
A Lasting Power of Attorney comes into effect if you lose mental capacity or you no longer wish to make decisions for yourself. It enables you to give someone you trust the legal authority to make decisions on your behalf.
There are two types of LPA:
- LPA for financial decisions – this can cover things such as buying and selling property, investing money or paying bills. Your attorney must keep accounts and make sure their money is kept separate from yours, and you can request regular details of how much is spent and how much money you have. These details can be sent to your solicitor or a family member if you lose mental capacity.
- LPA for health and care decisions – this covers decisions relating to your health and care and can only be used once you have lost mental capacity. Your attorney can make decisions about things such as where you should live, your medical care and who you should have contact with.
5 common myths about a Lasting Power of Attorney (LPA)
1. I don’t think I need one
Setting up an LPA sounds as if it would be a complicated business and that it’s only for people with significant assets.
The truth is that an LPA can cover either financial or healthcare decisions, and these can affect everyone. Financial decisions may be as simple as who pays your bills, while the loss of capacity can happen to you irrespective of your income or assets.
Anyone over the age of 18 should consider taking out an LPA. The older you are, the more important this becomes.
More than 800,000 power of attorney applications were made in the year to April 2019 alone, according to the Office of the Public Guardian. Factors driving the increase in people setting up LPAs include an aging population, the trend of people investing their pension in retirement, and greater awareness of the medical conditions that can cause people to lose capacity.
2. I don’t need two LPAs
As we saw above, there are two types of LPA. While you can choose to have one or both, many people have set up a financial LPA but not a healthcare LPA.
For many people, it’s sensible to have both types of LPA in place. Your financial LPA can cover managing your accounts, paying bills and collecting your pension, while the healthcare LPA can be used to manage your daily routine.
3. An LPA will be too expensive to set up
Setting up an LPA need not cost a fortune. You can set up an LPA online through the Office of the Public Guardian, at a cost of £82 for each one in England and Wales and £77 for each in Scotland.
If you’re worried about completing the forms, you can also set up your LPA through a solicitor. Having an LPA set up professionally can ensure that it is done correctly and should help to reduce the likelihood of any family disputes in the future.
Fiona Heald, Partner on the Court of Protection team at law firm Moore Blatch, says: “If someone does it [sets up an LPA online] and it’s done badly, the fees for putting it right are more than if we did it in the first place.
“Like homemade wills, homemade LPAs are not necessarily a good thing. It looks such a simple form, but it is easy to get it wrong and for people not to do what they wanted to do.”
The cost of setting up an LPA through a solicitor may be around £500 to £1,000, depending how many LPAs you wish to set up.
It’s also important to think about how much it would cost if you didn’t have an LPA in place.
Without this legal document, families can’t deal with finances; for example, investments in an income drawdown scheme. Instead, you must apply to the Court of Protection for the power to step in – and this can take 16 weeks or up to six months.
The court fees are £400 for each deputyship – health and welfare, and property and finance – and you also need a medical certificate, which can cost up to £300.
If you are appointed a deputy you need to pay a £100 assessment fee if you’re new to the job. And you must pay an annual supervision fee, which is £320 a year for general supervision and £35 a year for minimal supervision (if you are managing less than £21,000).
4. There is no hurry, I can leave it until later
You can only take out an LPA if you have mental capacity. If you lose capacity, through either ill health or an accident, then it’s too late to take one out.
Zurich say: “Once mental capacity is lost, it’s too late. Then the courts will be involved in deciding on deputies to manage the person’s affairs – this may not be who the person wanted it to be.”
Most experts recommend that you take out an LPA as soon as practicable, even though there may be a long period between the LPA being established and the attorneys needing to take over.
5. It doesn’t matter very much who I select as my attorney
Your attorney should always be someone that you trust. So, it’s vital that you take care when selecting who you want to act on your behalf.
You’ll need to decide whether to have more than one attorney. If you do, you should decide whether they will act jointly (where decisions must be made together) or severally (where each attorney can act independently).
Emily Deane, Technical Counsel at STEP, the global professional association for practitioners who specialise in family inheritance and succession planning, says: “Lasting powers of attorney have a crucial role to play in looking after vulnerable people, including the elderly and those with medical conditions. However, they need to be created with care and understanding by all of those involved.
“Families need to plan carefully and collaboratively. You should not underestimate the responsibility bestowed upon the person acting as attorney.
“Careful consideration and diligent planning are needed to help ensure that they are the right person for the job, have your best interests at heart and will respect the values you hold, if and when you lose the capacity to make decisions.”