One of the most common gaps I see when reviewing a client's financial and estate planning is the absence of a Lasting Power of Attorney (LPA). Despite having carefully arranged their pensions, investments, life insurance and wills, many people have not considered who would make decisions on their behalf if they were suddenly unable to do so. There is often a misconception that a husband, wife or adult child can simply step in and manage finances or make healthcare decisions. Without a valid LPA in place, families can face a lengthy and costly court process before they are able to help. Having LPA to be one of the most important documents in any financial planning strategy.
Why Every Adult Needs a Lasting Power of Attorney
More than 50,000 Lasting Power of Attorney (LPA) applications were rejected in a single year due to errors in the paperwork.
That statistic alone should be enough to encourage people to act sooner rather than later.
Yet the bigger issue is not rejected applications. It is the number of families who discover too late that they have no legal authority to help a loved one who has lost mental capacity.
Whether through dementia, stroke, serious illness or an accident, losing the ability to make decisions can happen unexpectedly. When it does, many families assume that a spouse or adult child can simply step in and take over.
Unfortunately, that is not how the law works.
The Myth That Causes the Most Problems
One of the most common misconceptions is that a husband, wife or adult child automatically has the authority to manage finances or make decisions on behalf of a loved one.
They do not.
Without a valid Lasting Power of Attorney, family members have no automatic right to access bank accounts, manage investments, deal with pension providers, sell property or make important financial decisions.
Even where everyone agrees on what should happen, organisations such as banks and investment companies require legal authority before they can act.
What Can Actually Go Wrong?
Many people view LPAs as something that might be useful in the future.
The reality is that problems begin almost immediately when capacity is lost.
Frozen Accounts and Financial Delays
In a case considered by the Financial Ombudsman Service, a bank restricted access to banking facilities once it became aware that the account holder had lost mental capacity.
The family simply wanted to help manage day-to-day finances but were unable to do so until legal authority had been established.
Imagine being unable to access funds to pay care fees, household bills or ongoing living expenses while waiting for the legal process to catch up.
Stress at the Worst Possible Time
One daughter publicly described the difficulties she experienced while trying to help her terminally ill mother.
Delays in obtaining authority created additional stress during an already emotional period and her mother died before matters could be fully resolved.
When families should be focusing on care and support, they can instead find themselves dealing with legal applications, administration and uncertainty.
The Court May Decide Who Acts for You
If no LPA exists and capacity has already been lost, the only alternative is usually an application to the Court of Protection for a Deputyship Order.
This means you no longer choose who manages your affairs.
Whilst the Court may appoint a family member, it is ultimately the Court that decides. In some circumstances a professional Deputy may be appointed instead.
An LPA allows you to retain control by choosing who will act on your behalf.
The Hidden Cost of Doing Nothing
Many people assume that because an LPA may never be needed, it can wait.
However, delaying can be expensive.
The Emotional and Financial Costs of Not Having an LPA in Place
By comparison, if capacity has already been lost and no LPA exists, the family may need to apply to the Court of Protection for Deputyship.
Potential costs include:
- Court application fees
- Capacity assessment fees
- Solicitors' fees
- Security bond costs
- Annual supervision fees
- Ongoing reporting requirements
It is not unusual for the first-year costs to run into several thousand pounds.
The greater cost, however, is often the delay. Deputyship applications can take months to be approved, leaving families unable to manage finances while waiting for authority to be granted.
Even When People Decide to Act, Mistakes Happen
Many people decide to create LPAs but leave them until later life.
This can be risky.
For a healthy individual, a rejected application may simply be frustrating.
For someone whose mental capacity is deteriorating, the delay could mean they lose the ability to create a valid LPA altogether.
Once capacity has gone, it is too late.
The Two Types of LPA
Property and Financial Affairs
This allows your chosen Attorneys to manage matters such as:
- Bank accounts
- Savings and investments
- Pension income
- Household bills
- Property transactions
Health and Welfare
This allows your Attorneys to make decisions about:
- Medical treatment
- Care arrangements
- Living arrangements
- Day-to-day welfare decisions
Most people choose to put both LPAs in place so that financial and personal matters are covered.
Choosing the Right Attorneys
The most important decision is often not how the documents are prepared, but who you appoint.
Your Attorneys should be people you trust completely to act in your best interests.
Many people appoint a spouse, adult children or a combination of family members. Others choose trusted friends or professionals.
You can also appoint replacement Attorneys who can step in if your original choices are unable or unwilling to act.
The Best Time Is Before You Need One
No one enjoys thinking about losing mental capacity.
However, the consequences of failing to plan can be significant.
Without an LPA, your family could face frozen accounts, Court of Protection applications, additional costs and months of delay before they are able to help.
With an LPA in place, the people you trust can step in quickly and act in accordance with your wishes.
The best time to arrange a Lasting Power of Attorney is while you are healthy and capable of making your own decisions.
Once capacity has been lost, the opportunity has gone.
How Can LPAs Be Arranged?
There are several options available.
Complete Them Yourself
The Office of the Public Guardian provides an online service allowing individuals to prepare their own LPAs.
This can be suitable for straightforward situations and keeps costs to a minimum.
You do not need a solicitor or specialist estate planning firm to register an LPA. The Office of the Public Guardian currently charges a registration fee of approximately £92 per LPA (£184 for both).
However, doing it yourself is not without risk. Official figures show that more than 50,000 applications were rejected in a single year because forms were completed incorrectly.
Common mistakes include:
- Documents being signed in the wrong order
- Missing information
- Errors in attorney details
- Problems with witnessing requirements
Use a Solicitor
Many people prefer professional guidance to ensure the documents are completed correctly and reflect their wishes. Solicitor fees can vary widely in London but a range to expect for a solicitor is £700 – £1,500 per LPA plus registration fees.
Use a Specialist Estate Planning Firm
To help ensure my clients have access to high-quality estate planning services, I have partnered with The Secure Will Company and have become a member of The Society of Will Writers. This partnership allows me to take instructions directly from client. Documents are then prepared and reviewed by The Secure Will Company in the preparation of Wills, Lasting Powers of Attorney (LPAs), and other estate planning arrangements. Having an up-to-date Will and appropriate LPAs in place is a vital part of any financial plan, helping to ensure that your wishes are carried out and that trusted individuals can act on your behalf should you become unable to make decisions for yourself.
As a member of the Society of Will Writers, I am required to maintain Professional Indemnity Insurance of at least £2 million. In addition, Society members contribute to a Public Indemnity Fund, which helps ensure that clients' Wills and Lasting Powers of Attorney can still be completed should a member become unable to continue due to serious illness, death or insolvency.
The cost of preparing an individual LPA is £325 + VAT or £600 +VAT for both LPAs per person. Registration fees are currently £92 per LPA and are charged separately.
The information in this article relates to Lasting Powers of Attorney (LPAs) in England and Wales. Scotland has a similar system, but the legal framework, terminology and procedures differ under Scots Law.
Will writing and Lasting Powers of Attorney are not part of the 2plan Wealth Management Ltd offering and is offered through the Secure Will Company. 2plan Wealth Management Ltd accept no responsibility for this aspect of our business. Will writing, Lasting Powers of Attorney are not regulated by the FCA. Corey Cook is a member of the Society of Will Writers which can be verified here.