This article has been submitted by Magenta Financial Planning
The past three decades have seen incredible advancements in modern medicine; meaning that life expectancy in the UK is continuing to increase. However, this is very much a double-edged sword, with the number of people suffering from dementia also rising significantly. According to the Alzheimer’s Society, by 2025 more than 1 million people in the UK will have Dementia. As with any mental illness, managing financial affairs becomes difficult and time consuming and can lead to high stress levels for families or those left dealing with the complexities of managing a person’s affairs when you don’t know their wishes.
In this article, we explore the benefits of putting in place a Lifetime Power of Attorney – a legal document that is well worth investing in and that is particularly important for business owners.
What is a Lasting Power of Attorney (LPA)? 19
The term ‘Lasting Power of Attorney’ refers to ‘the authority to act for another person in specified or all legal or financial matters’. The LPA allows individuals to appoint a representative (or up to 4 individuals) as your Attorney(s) to make decisions on your behalf if you cannot.
There are two separate kinds of LPA, covering different issues:
- Property and financial affairs.
- Health and welfare.
A property and financial affairs Power of Attorney, appoints an attorney to make financial decisions – dealing with your bank accounts; handling day-to-day finances; dealing with taxes and making gifts that you like to make (e.g. birthday presents to relatives) on your behalf.
A health and welfare Power of Attorney, appoints an attorney to make decisions such as, giving or refusing consent to particular medical treatments, deciding whether you should continue living at home or move into a residential care home etc.
You can choose to have only one type of LPA or both.
Remain in control
One of the main attractions in appointing an attorney is that you remain in control of your life when medically, you may not be. If you can foreseen the risks of falling ill, you can make plans and have the conversations you need to get your wishes across to the right people. For instance, if you are unable to look after your business, who will manage it for you? What type of care would you want to receive? Such questions can be answered in advance, meaning that in times of difficulty and urgency, your appointed representatives can step in and know what to do.
Protect your family from stress
Although it is incredibly important to protect your family financially, it is equally important to eliminate as much stress as possible during times of incapacity. Having a Lasting Power of Attorney, means you can appoint the right individual or individuals to take on the necessary duties and make decisions that you would have made yourself.
This means your family can focus on what is important and not have to worry about making decisions about your affairs if you are incapable.
It is important to understand that LPAs are not just for the elderly – mental and physical incapacity can occur at any time, so at Magenta we encourage our clients to plan ahead, to ease the potential burden on loved ones.
It is always a good idea to have an LPA in place at an early stage when you have the choice of appointing someone you love and trust to this position, otherwise the Court of Protection will intervene and manage your financial affairs for you. In our experience, this makes every decision time consuming and complex.
Prevent financial hardship to your family or complications for the business
If you are a joint account holder and the other joint account holder becomes mentally incapable, you do not automatically have the right to access the account unless you have an LPA or an Order from the Court of Protection. Often this is overlooked and people think joint holdings will mean that access will still be possible.
If the joint account is frozen, this could result in severe financial hardship for a spouse/partner who is not be able to access the monies in the account. This could also impact on your business – what would be the situation if your business partner was incapacitated – would your business banking and management suffer?
Looking to appoint a Lifetime Power of Attorney?
If you would like to learn more about the process of appointing the right people, give the Magenta team a call. Supporting our clients with a variety of succession planning tools, we are able to assist in arranging Powers of Attorney for you at a lower cost that many legal firms.