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What is a Lasting Power of Attorney? In short, it’s a very useful and powerful legal document which specifies to whom you give authority to act on your behalf, should you become “incapacitated”. This refers to events which affect your physical and mental wellbeing, removing your ability to manage your personal affairs effectively and independently. As such, a LPA document comes into effect during your lifetime – not at the end of it, like a will does (which is a separate legal document). Below, our financial planning team at WMM explains how LPA works, the different types and how it can play a key role in your financial plan.
How LPA works
Lasting Power of Attorney (LPA) involves at least two concepts: the donor and the attorney(s). The former refers to you – the owner of the LPA document. The latter refers to the person (or people) who you want to deal with your affairs if you become incapacitated, and are stipulated in the document. LPAs replaced Enduring Powers of Attorney (EPAs) in 2007, although EPA made before October 2007 remain valid. You can create a LPA at any time whilst you have capacity.
Types of LPA
First of all, it’s important to distinguish between Lasting Power of Attorney and Ordinary Power of Attorney. The latter gives someone else power to act on your behalf for a limited time, and will expire the moment you become “incapacitated”. It is useful, therefore, as a temporary measure (e.g. to empower a friend to manage your property during a long spell overseas).
Lasting Power of Attorney, however, is a separate legal concept and comes into two main forms: property and financial affairs LPA and health and welfare LPA. The first gives your attorney(s) power to decide upon your money, finances and home – e.g. opening/closing bank accounts and selling your property. The second gives your attorney(s) the ability to decide upon your medical care, care home arrangements and daily routine (e.g. eating, dressing and washing).
LPA & financial planning
Lasting Power of Attorney has a huge impact on your household’s financial security – especially if you have children, or other dependents. Suppose you are a married father of three, and one day you become mentally incapacitated (e.g. due to an accident putting you in a coma). If you have insurance policies and bank accounts solely in your own name which your loved ones may need to urgently access, they will struggle to do so without LPA. In fact, this happened recently with ITV broadcaster Kate Garraway, whose husband suffered severe COVID-19 symptoms for about a year and was in a medically-induced coma for much of it. The lack of LPA put the family under enormous financial pressure.
If you do not put a LPA in place, then your family may need to apply to the Court of Protection for a Deputyship Order. This gives them “control” over your affairs, but it can be a long-winded and complex process which may leave your loved ones in financial difficulty in the meantime. It is also not cheap, with solicitors charging £850 + VAT (set by the court) – although costs can be even higher. Costs can quickly spiral as the court asks for medical forms and reports, typically requiring a doctor’s charge. In short, having a LPA in place not only helps to provide peace of mind and financial stability for your family, but also makes the whole process much easier for them to navigate should a tragic event occur. Here at WMM, our goal is to help protect families across Oxford and the wider area through robust, long-term financial planning which stands you and your loved ones in good stead for the here-and-now, and for the future.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469