Cases of dementia are steadily increasing in the UK – one in every 14 people aged over 65 are affected. If you become one of them, this could influence your decisions later in life. Setting up a lasting power of attorney is just one action you could take. Here, we ask two experts to explain the details.
The number of people suffering from dementia in the UK is estimated to be around 850,000, with around 225,000 people expected to develop it this year.
Dementia is one of several conditions that cause a progressive loss of mental capacity, so it’s important to have a later-life plan in place. Setting up a lasting power of attorney (LPA) is just one of the practical steps you can take to give you peace of mind and ease the potential burden on your loved ones, should you ever be affected.
What is a lasting power of attorney?
Michael Young (MY), director of the Trust and Tax Team at Thrings Solicitors, says: “Lasting power of attorney is a means by which someone (the ‘donor’) can appoint one or more other individuals (the ‘attorneys’) to make decisions and to undertake transactions on their behalf.”
How do the LPAs on offer differ?
MY: “The Property and Financial Affairs LPA does exactly what it says on the tin – it enables the attorney to undertake transactions involving the donor’s property and finances, from the day-to-day business of buying and paying for goods and services, to selling freehold property and other assets.” Sean McCann (SMc), NFU Mutual chartered financial planner, says: “A Health & Welfare LPA enables the attorney to make decisions in relation to medical care and treatment in circumstances where the donor is incapable of taking and expressing such decisions. This could include their daily routine (diet and dressing), where they live, medical care and even social activities. The attorney can only use this when the donor has lost mental capacity.”
Who should get an LPA and at what age?
SMc: “Any adult of sound mind aged 18 or over can set up an LPA. In practice, it tends to be older people who fear that they are losing their faculties but in theory everyone should have one – an accident or illness could lead to loss of mental capacity at any time.”
How is it arranged?
MY: “The LPA documents are available to download online along with extensive guidance (visit gov.uk/power-of-attorney). Once fully signed, it should be registered at the Office of the Public Guardian (OPG). Either a professional, such as a doctor or a lawyer, or someone the donor has known for two years should sign a certificate confirming that the donor fully understands the effect of signing the document and appointing the attorneys and that the donor is not being induced to make the LPA against his/her will.”
When and how does it become effective?
MY: “The LPA is only effective once it has been registered with the OPG – which can take up to 10 weeks – although it may include restrictions preventing an attorney from exercising their authority until the donor has lost capacity.”
What are the costs?
SMc: “Registering with the OPG costs £82, although exemptions are available if you receive means-tested benefits. A solicitor isn’t necessary but many people use one, or a local advice agency such as Citizens Advice Bureau.” MY: “As with anything else, it is sensible to seek quotes from a selection of solicitors, but typically the cost of preparing and registering a single power of attorney will be in the order of £600 plus VAT excluding the registration fee.”
What should you be wary of?
SMc: “As with a will, there is a tendency to leave making an LPA until it is needed, in which case it may be too late. It isn’t possible to set up an LPA for someone who has already lost mental capacity – in this situation the only option is to apply to the Court of Protection to become a ‘deputy’, which is much more expensive, complicated and time-consuming.” MY: “Attorneys are duty-bound to give the donor the opportunity to take part in the decision-making process, but clearly the appointment of an attorney requires a very high level of trust. Choosing more than one attorney to share authority could provide greater security and reduce the risk of abuse. “Sometimes a married couple will simply appoint each other but there is the possibility that one attorney might lose capacity themselves or even die before the donor. Thankfully, another major feature is the ability to name replacement attorneys to take over, for example, a mother and father could name each other as their first choice, and name their children as replacement attorneys.”
What are the implications for Inheritance Tax (IHT) planning?
SMc: “The possibility of higher numbers of dementia diagnoses makes it even more important to think about IHT while you are fit and healthy. Once dementia is diagnosed, an attorney cannot make gifts over and above customary Christmas, wedding and birthday presents, or donations to charities that the donor already supports.”
MY: “Attorneys are very restricted in terms of their ability to make gifts on the donor’s behalf. In practice, the attorney’s authority enables ‘normal’ gifts – normal means what has been the donor’s practice while of full capacity. It most certainly does not enable the attorney to engage in making gifts on the donor’s behalf in the context of IHT planning.”
For security and training purposes calls may be recorded and monitored.