Many people make arrangements for what should happen to their property and finances after they die.
However, fewer people make arrangements for someone else to manage their finances for them during their lifetime, for example in the event that they lose mental capacity.
According to the Office of the Public Guardian, although an estimated 40 per cent of the adult UK population have a will, less than 1 per cent have put in place a Lasting Power of Attorney.
Many people assume that there is an automatic right for a family (or a spouse) to deal with an individual's finances once they lose capacity or if they cannot manage their own finances for some other reason, but without a power of attorney having been put in place, this is not the case.
What is an LPA?
An LPA is a legal document which allows an individual (the donor) to choose people to make decisions for them. These people are called the attorneys.
There are two types of LPA that can be made in England and Wales: one for health and care decisions and one for property and finance decisions. The LPA for property and finance decisions is the main focus of this article.
It gives the donor's attorney(s) authority to deal with their financial affairs for them, such as opening, closing and operating bank accounts, paying bills, claiming pensions, and making or selling investments or real property, or even running a business.
An attorney must be an adult of sound mind who is not bankrupt: they can be a professional (such as a solicitor), but most people choose family members, such as spouses or their adult children; friends or other people they trust for this role.
If an attorney is not a professional, the important thing (as stated in the OPG's guidance itself) is that the parties know each other well and the attorney(s) respect the donor's views and will act in his or her best interests.
When can they be put in place?
Financial LPAs can be put in place so that they are effective either immediately, or when an individual has lost capacity.
Therefore, while more often than not it is older clients who consider putting LPAs in place, there is great value in putting a financial LPA in place as soon as possible so that it can be used in light of an emergency situation, such as an individual suffering an injury causing them to be housebound for a period of time.
The authority afforded by an LPA can also be useful in more simple everyday circumstances, for example, where a spouse wants to access a bank account on their partner's behalf, though it is important to note that if the donor has not lost capacity, their attorney is under a duty to act only with their consent.