Posted 15th April 2020
There are two types of LPA. Firstly, there is a ‘property and financial affairs’ LPA, which gives the attorney(s) the power to make decisions in relation to the donors finances etc. This LPA can take effect as soon as it has been completed and registered, or it can be used at a later date. The second type of LPA is ‘health and welfare’, this gives the attorney(s) powers to make decisions relating to the donors medical and care decisions. This type of LPA can only be used once it has been registered and the donor has lost mental capacity and as such is unable to make decisions.
What are the benefits to me of setting up an LPA? What will happen if I don’t?
If, at some point in the future, you were to lose mental capacity, you would no longer be able to make and act on a particular decision, such as, altering the required income from your pension account. If you have in place an LPA, the attorney(s) chosen by you, can make those decisions on your behalf and have a duty of care to act in your best interests. Therefore, the decision to alter your pension income can be taken immediately by your chosen attorney.
If you do not have an LPA in place, the only alternative is an application to the Court of Protection for the appointment of a ‘deputy’. The initial and ongoing costs associated with a deputyship are very high and often amount to thousands of pounds. You also do not have control over who is appointed as your deputy (although it would normally be someone from among friends and family), and the application to the Court can be complex and time-consuming. Typically these applications can take up to a year to complete, during this time you will not be able to access your financial accounts or alter any existing instructions.
Making an LPA gives you control over the question of who is to look after your finances and/or welfare if you become unable to make decisions for yourself. It is significantly more economical in both cost and time, and it will ease the burden on you and your family if you need to be looked after in the future.
Making an LPA
There are a number of elements to consider when making an LPA and we strongly suggest you seek professional advice. We have over the years worked with a number of legal professionals and are happy to refer you to someone whom we know and trust.
One point to consider is how your investments are to be managed were you to lose capacity. As wealth managers who are authorised to provide a Discretionary Investment Service, in order for us to continue managing your portfolio the following clause would need to be inserted in ‘Part 7’ of your LPA:
“My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees.”
Please call us to discuss.