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Being prepared for a life-changing event could be invaluable for your family’s future wellbeing.
While you may already have taken out protective measures such as life insurance, critical illness cover, or income protection insurance, there is another protection document that very few people have: a Lasting Power of Attorney (LPA).
According to Canada Life, as of May 2022, 80% of UK adults did not have an LPA, including 77% of over-55s – yet the importance of this document cannot be understated. The truth is, most people only know they need an LPA when they need an LPA.
Keep reading to find out what an LPA is, how to register one, and why this form of protection could make a huge difference to your family if you were affected by a severe illness or injury.
A Lasting Power of Attorney helps your family access your documents if you lose mental capacity
If an illness or injury caused you to lose mental capacity, leaving you unable to make your own decisions, it may be very difficult for your family to access essential documents they may need.
Indeed, many people believe that a next of kin can be given access to a person’s documentation if they lose cognitive capacity, including:
Mortgage agreements
Insurance policies
Bank accounts
Trusts
Investment accounts.
However, this is untrue – being someone’s next of kin is not enough to access someone’s finances under these circumstances.
And, once you are no longer able to decide who should take over your finances in the event of an emergency, it is down to the Court of Protection to nominate a “deputy” who will be given access to your wealth. As you can imagine, this process can take weeks and cause immense stress to families.
What’s more, sadly, cases of illnesses like dementia are rising. The Social Care Institute for Excellence (SCIE) says around 209,000 people are diagnosed with dementia every year, and the number of people living with the disease is expected to surpass 1 million in 2024.
With all these factors to consider, taking out an LPA could provide enormous peace of mind.
A financial Lasting Power of Attorney gives a trusted person access to your money
There are two types of LPA: health and social care, and financial. Both are incredibly useful, but we’re just going to talk about financial LPAs here.
A financial LPA functions like this:
You nominate one or multiple “attorneys”, usually a close family member or friend, who can take control of your affairs at any time.
If you lose mental capacity this will be automatic, but even if you still have capacity, you can give them access to important accounts and documents whenever you like.
An attorney can claim on your insurance policies, buy and sell properties and other assets, and give money to others – in short, they have full control over your finances.
You can provide specific stipulations when you register your LPA. For instance, you could instruct your attorney on how or when you would like your home to be sold if you can no longer make this decision for yourself.
While you still have mental capacity, you can alter or nullify an LPA at any time – in the case of a divorce, perhaps, you may wish to remove your ex-spouse as your attorney and replace them with another family member.
At its core, a financial LPA is designed so that the attorney puts your needs and wishes at the heart of their decisions.
You can register a Lasting Power of Attorney on the government website
Fortunately, registering an LPA is relatively straightforward.
You can apply for one yourself on the government website, you can employ a solicitor, and from 1 January 2024, Atherton York will be licensed to do this for you too. We will also be able to support you in drafting or updating your will. Please let us know if you have an interest in this service which will be discounted for existing Atherton York clients.
It may take a few weeks to set up your LPA. The registration fee is £82 at the time of writing, or £164 for both types of LPA. This is subject to change in future, and only reflects the price of registering the LPA, not including the cost of any professional advice you may seek.
One important step to take before registering an LPA is to contact the person or people you have chosen as your attorneys and ask for their permission. The role of attorney requires maturity and is a weighty responsibility, so it may be wise to talk things through in full before proceeding.
If your proposed attorney is unsure whether to agree to your request, discussing this together with a financial planner may be constructive.
3 major benefits of registering a Lasting Power of Attorney
1. You can control who has access to your money
You have worked hard all your life to acquire your wealth, so it makes sense to have some say in who takes it over later on.
Indeed, if you lose mental capacity or simply feel unable to maintain all your finances in the future, you now have the power to choose who will step in. But once you can no longer make decisions for yourself, this choice is passed to the Court of Protection.
As such, registering an LPA now gives you full control over who takes on this role.
2. Your family knows who will assume responsibility for your finances if you lose mental capacity
In the event of an illness or injury that renders you incapacitated, your family will inevitably experience significant distress.
While having an LPA doesn’t take that away, it does give your loved ones one less thing to worry about at that time.
Once you have chosen an attorney, discussed the LPA with them, and registered the document, it may be wise to inform the rest of your loved ones who you have nominated.
3. You gain immeasurable peace of mind
Ultimately, an LPA doesn’t just provide a safety net for your finances, it offers peace of mind too.
While hopefully you will never have to use your LPA, knowing this document is there for your family to rely on could help you sleep better at night.
Get in touch to learn how we can help you protect your finances against the unexpected
An LPA is just one document among many useful protective measures you can put in place.
To find out more about how financial planning can help you shield your wealth from unexpected events, email info@athertonyork.co.uk or call us on 0208 882 2979 for more information.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions.