It can be hard to plan for the potential challenges that could hit us in later life, as we simply cannot imagine ourselves being ill enough or lacking the mental capacity to make the right decisions for our wellbeing.

This problem will only become more prevalent in an ageing population. A reported one in six of the UK’s population is over the age of 65, expected to rise further in the coming decades.

If you haven’t planned for the potential challenges that old age brings, it can make it difficult for your family to help you. “Often it is left to families to make arrangements for care, but nobody can make decisions or help with your affairs unless you have given them permission,” says Deborah Stone, co-founder of the information site for elderly care, myageingparent.com. “If you haven’t made arrangements in advance, then it is difficult and expensive.”

The importance of planning ahead

A lasting power of attorney (LPA) is a key step that can provide you with peace of mind and ease the potential burden on your loved ones, should you lose the mental capacity to make decisions about your welfare and / or finances. An LPA 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. Taking this important step can save your loved ones a lot of worry, time and money further down the line.

The important thing to be aware of with an LPA is that it cannot be set up for someone who has already lost mental capacity. If you put it off until this happens, the only option is for your family to apply to the Court of Protection to become a ‘deputy’, which is a far more expensive, complicated and time-consuming process.

What you need to plan for

There are two different types of LPA. A Property and Financial Affairs LPA enables the attorney(s) to undertake transactions involving your property and finances, from the day-to-day business of buying and paying for goods and services, to selling freehold property and other assets.

A Health and Welfare LPA will allow the attorney(s) to make decisions in relation to your medical care and treatment in circumstances where you are incapable of taking and expressing such decisions. This could include your daily routine (diet and dressing), where you live, medical care and even social activities. The attorney(s) can only use this when the donor has lost mental capacity.

It’s also important to think about the implications of Inheritance Tax (IHT) while you are fit and healthy. Once dementia is diagnosed, it is very difficult for an attorney to make gifts over and above customary Christmas, wedding and birthday presents, or donations to charities that the donor already supports. It does not enable the attorney to engage in making gifts on the donor’s behalf in the context of IHT planning.

The LPA 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. It can take up to ten weeks for the LPA to become effective once it has been registered with the OPG, although it may include restrictions preventing an attorney from exercising their authority until the donor has lost capacity.

And don’t forget

When considering the potential challenges of old age, you also need to consider what happens to your estate after your death. Dying without a will, known as dying intestate, can make life difficult and expensive for the loved ones you leave behind. If this happens, your assets are divided according to law, which may not be what you are expecting. According to a survey conducted by YouGov, just 41% of all adults say they currently have a will.

“People can be reluctant to talk about their will or an LPA, because they don’t want to damage relationships with family members, says Diana Chambers, a family wealth mentor. “However, a transparent discussion about the future, where you listen to and respect the views of those who will be personally affected by your plans, can help you make better decisions, and genuinely enhance family relationships.”

Lasting power of attorney tips

Choose your attorney(s)

You can appoint one or more individuals to make decisions and to undertake transactions on your behalf. If a married couple appoint each other there is the possibility that one attorney might lose capacity themselves or even die before the donor. In situations like this, you can 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.

Understand the different types of LPA

There are two types of LPA – Property and Financial affairs LPA or Health and Welfare LPA. It is sensible to have both but they do not have to be done at the same time.

Decide if you need advice and how you would like to make the LPA

A solicitor isn’t necessary but many people use one. As with anything else, it is sensible to seek quotes from a selection of solicitors - the cost of preparing and registering a single power of attorney can cost up to £1,000. The LPA documents are available to download online along with extensive guidance (visit gov.uk/power-of-attorney/make-lasting-power).

Register your LPA

Registering with the Office of the Public Guardian (OPG) costs £82 (per LPA), although exemptions are available if you receive means-tested benefits. The forms will need to be signed by a professional such as a doctor or a lawyer, or someone the donor has known for two years. This is to confirm that you fully understand the effect of signing the document and appointing the attorneys. It can take up to ten weeks for the LPA to become effective once it has been registered with the OPG.

 

Get in touch

It’s important to get the right advice when planning your financial future. Speak to your local NFU Mutual Agent or phone 0800 056 0142 (select option 3) and we will put you in touch with your personal Financial Adviser.

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