If you lose the capacity to make decisions for yourself, you’ll need someone else to do that for you. If you draw up a power of attorney – a legal document – before you lose the mental ability to make decisions, you can decide who would look after your money if you can’t. It’s not complicated and it’s worth doing.
Setting up a lasting power of attorney
If you have a serious accident or become ill (for example, because you develop dementia) and you cannot look after your financial affairs any longer, you should have a legal document in place that says who should take over the running of your finances and make decisions about your welfare.
SAVVY TIP: Ongoing powers of attorney are called lasting powers of attorney in England. In Scotland this is called a continuing power of attorney and in Northern Ireland it’s called an enduring power of attorney.
- Without a legal power of attorney, you can’t choose who makes financial decisions. If you don’t have a lasting power of attorney, the government-appointed court of protection will choose someone (in legal jargon, they’re called a ‘deputy’ in England, a guardian or intervener in Scotland and a controller in Northern Ireland ) to make decisions about your finances for you.
SAVVY TIP: The law in England and Wales changed in October 2007. Before that date you could draw up an enduring power of attorney (the correct name for the ongoing power of attorney at that time).This was much cheaper than a lasting power of attorney. The law was changed because there were concerns that some could take advantage of elderly people and take control of their finances without them realising it.
- If the court of protection appoints a deputy, administration costs can be significant. Even if the deputy is trying to do relatively straightforward things, such as pay the mortgage or sell the house, you may be faced with a bill of hundreds or even thousands of pounds.
SAVVY TIP: If you had to go into care and you were unable to make decisions about your finances, the court of protection might appoint your local authority to be a deputy, which some solicitors believe can be a conflict of interest. That’s because the local authority will be making decisions about payments to the local authority.
Financial or welfare power of attorney
I’m focusing on what happens to your finances if you’re not able to make your own decisions, but there is another type of lasting power of attorney in England and Wales (sometimes mistakenly called a ‘living will’) which covers your health:
Property and financial affairs LPA: this appoints someone (or more than one person) who can deal with decisions about your home and finances, such as running your bank account, paying bills, paying for care and sorting out your tax return.
Health and welfare LPA: this appoints someone to deal with decisions about where you live, the clothes you wear and medical and day-to-day care.
How much does a power of attorney cost?
If you use a lawyer, lasting powers of attorney (LPA) aren’t cheap (they cost a minimum of £150 for each one per person, although your bill could run to hundreds of pounds). However you can draw up an LPA yourself. You can find information about how to set up a lasting power of attorney on the Gov.uk website. Lawyers who are members of Solicitors for the Elderly specialise in this area.
Deciding who should be your attorney
You’ll have to name several people when you take out a lasting power of attorney. They include:
- Attorneys: They will make decisions for you. Who you appoint is up to you, but it should be someone you trust and someone who you think would be able to cope with the administration. Appoint more than one attorney (for example, your husband or partner plus one or more of your children).
SAVVY TIP: If you appoint your attorneys jointly, they’ll have to agree everything together so it’s a better idea to appoint them ‘jointly and severally’, so they can make decisions individually.
- Person to be told: You can choose up to five people who will be informed once the power of attorney is registered with the Office of the Public Guardian (which has to be done before it can be used). It’s a safety measure to stop someone you’ve appointed from taking control of your affairs without anyone knowing about it.
- Certificate provider: You’ll also have to appoint a certificate provider, who is normally either the lawyer drawing up the power of attorney or your GP. They’re there to check that you know what you’re doing and that you haven’t been pressured into drawing up the power of attorney.
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