LASTING POWERS OF ATTORNEY
Plan for the worst, hope for the best
Why should I make a Lasting Power of Attorney?
Two in every three people will lose their mental capacity at some point. For many, this is the result of an illness such as a stroke, a coma, Alzheimer’s or dementia. Capacity can be lost through an accident too.
If you were to lose your mental capacity, and you do not have a valid Lasting Power of Attorney in place, things can become very difficult. In such circumstances, your loved ones would have to apply to become your “Deputy” through the Court of Protection. Deputyship can be a time consuming and costly court process; often entering into thousands of pounds. Also, whilst a deputyship application is pending, the court will freeze all of your accounts and assets (including joint assets). In many cases, these assets can be frozen for several months.
In order to avoid the complications, costs and time involved with deputyship, clients are advised to make their Lasting Powers of Attorney whilst they still have their mental capacity. Lasting Powers of Attorney are legal documents in which you, the “Donor” appoint “Attorneys” (often friends and/or family members) to make decisions on your behalf if you are ill or lose capacity. As you are giving the authority to your attorneys to act, the courts do not need to be involved.
What are the benefits?
Without a Lasting Power of Attorney, it is the courts that will ultimately decide who may or may not deal with your financial affairs. Equally, with medical matters, it will be the doctors who have the final say regarding any treatment that you may require.
By having a Lasting Power of Attorney, you can plan and specify in advance the decisions you want others to make on your behalf.
Where there are no Lasting Powers of Attorney in place, your loved ones will have to apply for “Deputyship”. This process can be very time-consuming and costly. There are not only application fees to pay, but ongoing fees too. These costs can often run into thousands of pounds.
PROTECT YOUR FAMILY
People often put Lasting Powers of Attorney in place to protect their families from the stress and delays involved in dealing with the courts. It also helps your loved ones to deal with your affairs quicker, and avoid problems with accessing your finances.
Attorneys appointed under a Lasting Power of Attorney have fewer administrative responsibilities than a Deputy appointed through the Court of Protection. Also, supervision is much more simple.
AVOID FROZEN ACCOUNTS
If someone loses their mental capacity, many of their assets including bank and building society accounts will be frozen. This will include any joint accounts and can lead to very serious financial issues. If you have a Lasting Power of Attorney in place, this can be avoided..
In the future, you may no longer be as active and may find it more difficult to carry out certain tasks such as going into the bank, paying bills or speaking on the telephone. By making a Lasting Power of Attorney, you can specify who you would like to act on your behalf in such circumstances.
Frequently Asked Questions
By having a Property Protection Trust (PPT) you are ensuring that your home, which is your most valuable asset, passes to your chosen beneficiaries regardless of what the future holds. If this is your goal, a PPT could help.
By making a Will, you are ensuring that your family will be taken care of and making the administration process much simpler.
Some people consider giving their property to someone else, such as a child, so that the asset won’t be counted for a care fees assessment. However, this may be viewed as a deliberate deprivation of assets, and you would then have to pay the same level of care fees as if you still owned the property.
Also, if your child’s circumstances were to change during their lifetime, you run the risk of losing the property and becoming homeless. For example, if your child went through bankruptcy, a divorce or they passed away, you may no longer be able to live in the property as the asset would be in their name and could be taken.
As a result, we would never recommend transferring a property into the names of children, or a third party without meticulous planning and advice.
Things are also more time-consuming and complex when a Will is not in place. This can cause additional stress for your family, at what is already a very difficult time.
Under the Wills Act 1837, in order for a Will to be legally binding it must be:
– made by a person who is 18 years of age or older, and who has their mental capacity;
– in writing; signed by the person making the Will and witnessed by two independent people;
– made of the person’s own volition, without pressure or coercion.
A witness cannot be a beneficiary of the Will, nor married to someone who will benefit. We normally advise that clients use close friends or neighbours as witnesses.
The witnesses are there to confirm that the Will was signed by the testator (the person making the Will), and that they knew what they were doing i.e. they were not under any undue influence or pressure to do so.
“Mirrored” Wills are commonly made by unmarried or married couples. Each person has their own document, but the wishes contained within them will be pretty much identical. For example, a “mirrored” Will may say that a couple want to leave everything to each other first, but then when both of them have passed away, the estate should pass to their children.
This is a term used to describe what assets of yours are left after any gifts, debts, tax funeral costs and other testamentary expenses have been paid.
The remainder of your assets are then distributed to your beneficiaries. This could include: your bank accounts, property and personal possessions.
Your residuary estate does not include things such as jointly owned property or bank accounts. It would also not include pensions or life insurance policies that have been written into trust – you would normally have nominated someone to receive these when you set them up.
You have to be at least 18 years of age to receive any inheritance that you may have been left. Sometimes clients feel that 18 years of age is still too young, and will instead opt for 21 or 25. Where a person is under the age of 18 (or whatever age you have specified), their inheritance would be looked after for them by trustees. The trustees would have the discretion to distribute money to them as and when they see fit. Once the child has attained the age of 18 or older, they will then become responsible for their inheritance and make all the decisions for themselves.
An Executor is someone who deals with the administration of your estate. You will appoint these people in your Will, and they are most likely to be close relatives or friends. For more complicated estates, it is not uncommon for someone to appoint a professional to act as their Executor.
An Executor is responsible for the following:
– Finding your Will;
Locating and valuing your assets;
Paying off any debts that there may be at that time;
Distributing the remainder of your assets (your residuary estate) to your beneficiaries.
A trustee is someone who looks after your property until a given time in the future. For example, where money has been left to a child, and they are unable to inherit until they attain a certain age.
Trustees must act with honesty, and integrity. Their responsibilities include: taking control of trust property, to safeguard such property and to act in the best interests of the beneficiaries.
A guardian is someone that you appoint to look after your child/children if something happens to you whilst they are under the age of 18.
If you pass away leaving young children, and you have not appointed a guardian, it will then become the role of the courts to find someone suitable to care for them. This could mean that someone other than who you would like is appointed to look after them.
No, but it is a good way of letting your executors what kind of funeral you would like. We would recommend that you discuss your preferences with your family too.