Protect Series 1
Legally, to make decisions about your money and property you must have mental and physical capacity.
People can lose capacity, often due to a medical event, and incapacity can continue for long periods.
Unfortunately, people often associate incapacity with a slow degenerative condition, such as dementia, which may allow plenty of time to arrange any legal documents before capacity is fully lost.
However, whilst dementia is a common cause of incapacity, there are many other ways capacity can be lost without warning, such as a stroke, heart attack or trauma injury.
What happens when you lose capacity?
When you lose capacity all assets you hold in your own name become frozen. This means no transactions can be carried out on anything, including bank accounts, property, savings or pensions. This also includes everyday accounts, which cannot be changed or stopped, such as gas, water, electricity, broadband, gym membership, etc. This is because only you have authority to operate your accounts and you have lost the capacity to do so.
Your partner and dependents could be faced with problems such as:
- Not being able to access any money held in accounts, savings or pensions in your name
- Not being able to access any joint bank accounts they hold with you
- Not being able to give instructions to utility companies where you are the account holder
- Not being able to sell any property you own jointly, even where the intention is for your benefit, such as assisted living
Perhaps the most unpleasant surprise for people who find themselves in this situation is that assets you hold jointly also become frozen. This includes joint bank accounts and jointly owned property.
This can often cause undue financial hardship and distress at a time when they’re trying to cope with a life changing event.
To obtain authority to handle the affairs of someone who becomes incapacitated without Lasting Power of Attorney, an application to the Court of Protection is required. This is an onerous process and you’ll be required to pay for medical reports, solicitors, barristers and court fees. Typical timescales for the process are close to a year and cost, on average, £10,000.
There’s also no guarantee the application will be successful and even where it is, you may not obtain authority if there are multiple competing applications from other family members or friends.
How does Lasting Power of Attorney work?
A Lasting Power of Attorney is a legal document that grants powers to people you trust, known as your Attorneys, and allows them to make decisions for you when you’re no longer able. There are two types:
- Financial and Property – This allows your attorneys to make and implement decisions concerning your financial affairs and, buy and sell property on your behalf.
- Health and Welfare – This allows your attorneys to make medical and care decisions on your behalf.
When making decisions on your behalf, your attorneys must act in your best interests. There are strict rules in place which prohibit attorneys from benefitting themselves in any way and the OPG can investigate if there’s any suspicion of wrongdoing by an attorney.
Why register your Lasting Power of Attorney immediately?
You may, if you wish, draft and sign your Lasting Power of Attorney but delay the registration costs until you lose capacity. The only benefit is kicking the cost down the road, but there are several disadvantages:
- If you register it at the point incapacity is lost there’s a minimum 12 weeks wait for the registration, during which time you’ll not have the legal powers of Lasting Power of Attorney. Those first three months are likely to be the most critical for making decisions.
- If there’s an error in your document it’ll fail registration and become invalid. Because you will, at that point, be incapacitated you won’t be able to correct the errors and register it successfully.
If you choose us to help you do this, a professional member of the Protect team will draw up your documents and register them with the Office of the Public Guardian (OPG), which is the government department responsible for granting powers.
If you’d like more information about whether Lasting Power of Attorney is something you should consider, get in touch on 01642 42 45 73 and we’ll talk through your options.
Joslin Rhodes are Independent Financial Advisers specialising in pension advice and retirement planning, authorised and regulated by the Financial Conduct Authority (FCA), we have the additional permissions to advise on defined benefit and final salary pension transfers.
Please note: Tax and estate planning services are not regulated by the Financial Conduct Authority.