Preparing for others to manage your finances should you no longer be able to take care of your own affairs
Many people don’t realise that if, in the future, they are unable to manage their own financial affairs due to old age, injury, illness or dementia it will not be possible for relatives to immediately step in to manage their finances for them.
Without forward planning it may be impossible for others to gain permission to manage your bank account, pay the bills, collect benefits or make other decisions about your finances. If you do not have capacity, loved ones will have to apply through the courts, a process that can be long and costly.
The only certain way to ensure that someone you choose and trust can make decisions on our behalf is to appoint them to be your attorney under a Lasting Power of Attorney (LPA). Hopefully you will never need it, but if you do, it will be a huge relief to know you acted with foresight.
There are two different types of LPA but the one relating to finances is a property and financial affairs LPA.
This type of LPA allows you to appoint a person (or up to four people) to take actions or make decisions on your behalf. This can include buying or selling property, managing bank, building society and other financial accounts, handling welfare benefits or tax credits, tax affairs, debts and legal proceedings.
If you run your own business, it’s possible to make two LPAs for Property and Financial Affairs – one covering your personal finances and one covering your business affairs as you might want to appoint different people.
Choosing your attorney
It is important to give some thought to who you would like to be your attorney and whether you would like to appoint more than one. Consider whether you trust them to act in your best interests, how well they know you and would understand what your wishes would be, whether they would be willing to make difficult decisions and also whether they have a good track record managing their own financial affairs. If you are appointing more than one attorney, consider whether they would work well together and are likely to agree with each other.
If you are appointing more than one, you can appoint attorneys jointly, which means that they must always do everything together. Or you can appoint them jointly and severally, which means they can act jointly (as above) but can also act independently. You can choose a combination of the two. Although appointing attorneys jointly seems like it would be a good way of them keeping tabs on each other, in reality it can be very difficult to operate the LPA. So you need to think very carefully before appointing attorneys in that way.
You can also appoint replacement attorneys.
You should always speak to the person or people you have decided to appoint as your attorney to ensure they are happy and able to take on the responsibility for your finances at a future date.
Managing your affairs whilst you still have capacity
Your appointed property and affairs attorney can manage your property and finances even whilst you still have mental capacity to do so as well as when you lack capacity. You may well find it easier, for example, to give someone the power to carry out tasks such as paying your bills, collecting your benefits or dealing with your bank or building society on your behalf.
There are a number of reasons you might do this, perhaps you have mobility issues, have difficulties using the telephone, or you might spend a lot of time abroad.
Restrictions and preferences
As part of the LPA process, you can include suitable restrictions and preferences to ensure that your wishes are followed or to give guidance to your attorneys.
This might include restricting what they can do with certain assets, stipulating that other named parties should also be kept up to date on your financial affairs or preventing the sale of your home unless doctors believe you are no longer able to live independently.
Whilst attorneys will be obligated to adhere to any restrictions, your preferences are not legally binding. They will however help your attorney by giving them clarity on what you would have wanted. This might be preferences over the kind of shares your money is invested in, annual donations to charity that you want them to continue or the level of funds you would like to retain in your current account.
Once made, an LPA must be registered with the Office of the Public Guardian before it can be used. There are specific procedures that must be followed in order to register the document.
For some it can be hard to imagine not being in a position to manage their own finances, for others, giving that responsibility to a loved one, even when they have capacity, can make life much easier. Certainly, by giving thought to what might happen if illness or injury means someone needs to take over your affairs and by drawing up an LPA, you ensure that if this does happen it will be simple for a trusted friend or family member to step in, without the cost and delay associated with applying through the courts.