Lasting powers of attorney – why do we need them and are they really necessary?
According to the latest NHS statistics, there are 820,000 people in the UK suffering from some form of dementia. By 2030, the number is projected to grow by 80%. For those affected and their families, this diagnosis can be devastating.
Coming to terms with the emotional impact of the syndrome is bad enough, yet the practical aspects of what this means can sometimes be overlooked.
Who will look after mum’s finances, for example, if she, herself, is no longer able to do so? What if mum has to go into a care home and the fees need to be paid from her bank account? What if the house needs to be sold (or rented out), to supplement the fees which she has to pay?
Lasting powers of attorney (LPAs) will solve this problem, because they will give someone else the authority (called the attorney) to act on behalf of mum. Attorney(s) will be able to deal with her property and financial affairs, as well as making important decisions about her health and welfare. This can include making decisions about life-sustaining treatments, depending on mum’s wishes.
In our opinion, the LPA is such an important document that we consider that everyone should have one, regardless of their age or state of health.
It is important to make sure that the LPAs are set up and registered at the Office of Public Guardian, before the donor becomes mentally incapable, otherwise an application will have to be made to the Court of Protection, and this is a much more expensive and time-consuming process – a bureaucratic nightmare, in fact! It can take months to sort out, and the costs can escalate into thousands of pounds (as opposed to a few hundred pounds, under normal circumstances).
There are two types of LPA: one for property and financial affairs; a second for health and welfare. Both of these must be registered at the Office of Public Guardian, before they can be used.
The property and financial affairs LPA can be used as soon as it has been registered, while that for health and welfare may be used only when the donor becomes mentally incapable. This may sound confusing, so the following is an example of what can go wrong, if no attorney is appointed under an LPA:
Mum and dad own their house jointly, and dad is diagnosed with Alzheimer’s. Mum cares for dad at home for a few years and then becomes ill herself. Mum eventually dies under the strain, and dad has to go into care.
The house is owned as ‘joint tenants’, meaning that dad (being the survivor) inherits the whole house automatically*. There is no LPA set up for dad; therefore, nobody has the authority to deal with the house in which mum and dad lived and no one can deal with his financial affairs or make decisions, when it comes to his health and welfare.
If LPAs had been set up for dad while he was in good health, then his attorneys could have managed all of this for him, including selling or renting the house (if necessary), to fund his care.
Even where couples have joint bank accounts and one has to go into care, this may not solve the problem, as some accounts will be frozen by the bank, if one of the account-holders loses mental capacity.
It is prudent to consider LPAs when writing your will – and we discuss this with our clients as a matter of course. You may find the following link helpful:
*Property can be owned jointly as ‘tenants in common’, meaning that each will own a specific share and that share can be left to someone else in your will, rather than your spouse or partner. This can sometimes be more tax-efficient or beneficial overall, depending on your circumstances.
For further information on LPAs or joint ownership of property, please contact Mary Hoffman (Swindon office, 01793 538198).