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I Don’t Have a Power of Attorney – What Are the Risks?

by | Nov 24, 2022 | Lifetime Solutions

Equity release in Leeds

By Alex Huckerby, Estate Planning Consultant

If you don’t have a Power of Attorney, does it matter? 

What are the risks of not having a Power of Attorney? 

Is it easy to do, and is it expensive? 

These are some of the questions we are asked daily when discussing our client’s needs and circumstances. Alex Huckerby, Estate Planning Consultant at Lifetime Solutions provides us with some answers.

Is it important?

A Power of Attorney (POA) is one of the most important documents that you can create in your life. 

However, many people wait until they’re older or when they start showing signs of illness or degenerative conditions before even considering putting one in place. The problem is, if you don’t do it when you have all your faculties, then it is usually too late!

So, why do we do that? 

Often, the younger we are, the more we feel like we are immortal! Unfortunately, illness, accidents and adverse circumstances can strike us at any age, and this can make life difficult for us and our loved ones if we are not prepared.

People take insurance for their holidays, homes and even their mobile phones, having an LPA is like putting an insurance policy in place to help protect yourself and your estate and ensure your instructions are followed if the worst happens.

It is true that on average, the older we are, the more vulnerable we are without an LPA, as losing capacity becomes a bigger risk with age related illnesses such as Alzheimer’s, dementia, or strokes. 

However, this doesn’t mean that this document is exclusively for older people, ultimately, life is unpredictable and that’s why its recommended for every person over the age of 18 to have a POA. Once you are an adult (18+), nobody is legally allowed to make decisions, or talk to medical professionals on your behalf unless they have the legal authority to do so.

What is the risk?

Imagine you are happily living your life when…. BANG! You are hit by a car, or have a stroke, or are struck down by COVID-19 and put on a ventilator.

Who has the power to deal with your bank accounts, manage your finances, pay bills, deal with your utility provider, manage your pension accounts, speak to your insurers? Even asking questions of these organisations is fruitless as your family must pass security checks and have the authority to act. 

When your representative says, ‘They are in a coma, bed-ridden, unable to speak’, the next question will be ‘Do you have written legal authority to speak on their behalf?’ If the answer is no that will be the end of the call. 

Even holding a joint bank account with someone does not prevent this being a problem. When the bank is made aware of the fact that someone is incapacitated, the account is usually frozen until authority is established. Even if half of the money in the account is your loved ones. How will they manage if they can’t get access to those resources?

Client’s have asked if it’s the same when you are married or in a civil partnership – Yes, it is! Even if you are the legal spouse, you must have authority to even ask a question. Try calling Sky if you are not the account holder and see what happens.

So, what does your family do next?

The danger of not creating Powers of Attorney and then losing the ability to manage your own affairs is that you will not be able to create one after the fact. Once mental capacity has been lost, you cannot create an a POA since you would not be creating while you have the understanding to give someone this power.  

If you have not created an POA before losing capacity, then your family or loved ones will have to apply for Deputyship through the Court of Protection. 

The process in gaining authority through the Court of Protection can be very time consuming and extremely expensive, not just with the initial legal charges, but also expensive to run with annual fees. It is also not guaranteed that your family will be granted a Deputyship Order, often the courts appoint the Local Authority to act a person’s behalf.

What’s the solution?

The solution is simply to be prepared by setting up a Power of Attorney in advance of you needing it. 

The different nations in the UK operate slightly differently but England and Wales operate identical options called Lasting Powers of Attorney (LPA), Scotland uses a Continuing Power of Attorney (CPA) and Northern Ireland uses an Enduring Power of Attorney (EPA).

The EPA in Northern Ireland only deals with Property & Finance matters but in the rest of the UK there are essentially two different documents, one for Property & Finance and one for Health & Welfare. The CPA in Scotland combine the two documents into one, but they work broadly the same.

A Health & Welfare power puts the attorney in a position where they can look after your medical and care needs. This can include accepting or refusing certain medical treatments and dealing with your specific wants and needs in how you are cared for. This is another risk factor, because if you have not created an POA you may not have a say in where you or how you live. Having to move a loved one into an assisted living arrangement can be an extremely distressing time for a family, especially if they are moving to somewhere they don’t agree with. Your appointed attorney can find a care home for you and can consult with staff about your wants and needs, meaning that your affairs are not left in the hands of strangers if something unexpected happens to you. 

Property and Financial powers allow your attorney to help manage your day-to-day spending, paying bills, managing services, dealing with your bank and financial institutions, purchasing equipment such as a stairlift or any other items you may need, and can even go as far as buying and selling properties. 

The key takeaway is that these documents can allow someone you trust to make important decisions on your behalf when you cannot make them yourself and grant them the legal authority to act if needed. They can be used if you have permanently lost capacity or even if you need temporary help.

Who is involved?

They key people involved are:

The Donor: This is you – the person who giving the authority.

The Attorney: This is the person or persons who will act for you.

The Certificate Provider: This person will certify that you are of sound mind when you are granting these powers.

In Scottish cases, the Certificate Provider is a professional (usually a solicitor) but in the rest of the UK this can be someone who has known you for a least two years, but they cannot be related and cannot be an attorney.

The final word

The cost of preparing and registering these documents is significantly less expensive than going down the route of a Deputyship and they allow you and your representatives more control over your affairs. 

Each POA document has a one-off cost which can typically vary between £200-£500 depending on whether registration to the courts is included and whether you use a Solicitor directly or go to a Specialist (who are often less expensive), the cost of a Deputyship by comparison, can be thousands to set up and then have ongoing costs.

To sum up, a Lasting Power of Attorney can stop you or your family from having to endure a lot of frustration and financial difficulties and can give you peace of mind and allow you to stay in control of your affairs. 

For more information on estate planning click here to contact the team at Lifetime Solutions

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