This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
What would happen to you (and your wealth) if you could no longer make independent choices? Power of attorney is designed to account for this scenario. As a legal document, it stipulates the conditions under which a trusted person acts on your behalf if, for instance, you lose “mental capacity”. Four in five UK adults do not have power of attorney in place, however, leaving them potentially vulnerable in difficult times. Below, our Burnley financial planners explain why power of attorney is so important, correcting four commonly-believed myths about it. We hope this content is useful to you and please get in touch if you’d like to discuss your own financial plan with us over a free, no-commitment consultation.
Myth #1: I don’t need power of attorney
Perhaps you are still young, are in good health and have no/few dependents. Yet the issues covered by power of attorney can impact anyone, at any time. If you entered a coma due to an accident, for instance, then who will pay your bills? What happens if an urgent maintenance problem arises in your home (e.g. a caved-in roof) and someone needs to organise repairs? Who will act on your behalf if there is an issue with your bank account?
As a general rule, if you are aged 18 or over, then you should consider taking out power of attorney. The older you get, the more responsibilities you tend to accrue, making the matter more important. Some people think that their next of kin can simply make decisions for them (e.g. if a health crisis occurs). However, without a LPA document the authority to make medical decisions for you rests with medical professionals – not next of kin – who are legally bound to make decisions they believe are in your best interests.
Myth #2: It’s too expensive
Try to think of power of attorney as an investment or insurance policy. In England and Wales, the registration fee is £82 for each LPA (lasting power of attorney). If you take out one for property and financial affairs and another for health and welfare, therefore, then the total cost might be £164. For some, this might sound expensive. Yet consider how much more it might cost you if, for instance, you compiled debts whilst out of mental capacity (e.g. due to a coma) and nobody has the authority to access your bank account to sort things out.
Power of attorney can be done by yourself, if you are fairly confident. You can apply for it only using the UK government’s portal or download the relevant forms to fill in by hand. If you get stuck, then you can call the Office of the Public Guardian on 0300 456 0300 for help.
Myth #3: a good attorney is not important
Whilst a “DIY approach” to lasting power of attorney is possible and can save you money, taking professional legal advice will help ensure you do not miss out anything important on your application. This is particularly important if you have a complex set of assets or if your family members do not get along. Elderly and vulnerable people, in particular, may benefit from professional help. Make sure that whoever you work with is competent and can be trusted to act on your behalf should your lasting power of attorney document ever be needed.
Myth #4: I just need a will
A will is not the same as lasting power of attorney. The former stipulates your wishes about your estate following your death – i.e. who should receive what. The latter details the process of who takes control of decisions about your health and/or finances while you are still alive. In fact, your power of attorney document ceased to be valid after you die. At this point, the nominated person in your LPA loses authority and the executors named in your will start administering your estate and applying for probate.
An LPA may never be used, but a will eventually will be. Take care not to delay the decision to set up the former until it is too late. If you do experience mental incapacity in later life, for instance, then you will be unable to establish power of attorney. At which point, you (and your wealth) will be out of your control. By making arrangements earlier in your life, you can protect your wishes if you lose mental capacity later.
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Be mindful that Enduring Power of Attorney is not the same as Lasting Power of Attorney. The latter replaced the former in 2007. Although they remain valid, they do not offer the same level of benefits as Lasting Power of Attorney (e.g. allowing for replacement attorneys if your first named attorney dies before you or can no longer act on your behalf).
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you. Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
E: info@elmfieldfp.co.uk
