As part of working on your preparations for ageing, you might want to consider including a Lasting Power of Attorney/LPA (also known as a POA) as part of your long-term plan.
But with so many legal processes and forms, the decision opens a door into a world that is confusing and potentially costly. What exactly is a Lasting Power of Attorney/LPA document? How many types of Lasting Power of Attorney/LPA are there? How are these types different? Why is a POA important to consider when planning on how your estate and finances will be managed should you become unable to look after your affairs as you get older? And one of the most important and confusing questions of all: what is the difference between an ordinary (or general) Lasting Power of Attorney/LPA and a durable Lasting Power of Attorney/LPA? And which one is best for you?
This brief guide will sort out much of this confusion, making the Lasting Power of Attorney/LPA process a lot easier to understand and your decision a lot easier to make.
Financial Lasting Power of Attorney/LPA: An Overview
Most simply, an ordinary Financial Lasting Power of Attorney/LPA is a legal document that gives a person or representative (like a lawyer) the power to act on your behalf in all financial matters. This person is known as your agent and that person can manage the financial aspects of your life should you become sick, disabled, or is physically incapacitated when important decisions need to be made.
What is the purpose of a Financial Lasting Power of Attorney/LPA?
It is important to remember that a financial Lasting Power of Attorney/LPA document only applies to the management of your financial matters. Other specialised documents are discussed later in this article to cover medical and other decisions that might impact your life.
If you want to ensure that your financial affairs are managed in the event that you are incapacitated, be sure to choose a durable Lasting Power of Attorney/LPA. It is a special Lasting Power of Attorney/LPA that includes wording and makes it useful in case of medical emergencies, debilitating cognitive decline, or other similar situations.
Most importantly, remember that setting up a Lasting Power of Attorney/LPA means that you protect your loved ones from any unnecessary legal battles should something happen to you that leaves you unable to manage your affairs.
How does Financial Lasting Power of Attorney/LPA work?
It is important to remember that the person you choose to act on your behalf can only make decisions based on how much power you give them in the POA form. Unless you limit or specify your agent’s authority, he or she can do almost everything with your finances that you can do, including signing cheques, buying and selling real estate in your name, and even buying consumer goods. Your agent does not own your money, property, or nice new big-screen television; you own the assets, but your agent is managing them on your behalf. So it is essential to understand fully what power you are giving your agent and how they can use that power.
Always remember that any Lasting Power of Attorney/LPA is a legal document that must be signed, witnessed, and notarised in order to be effective. Skipping any of these steps might make the document open to a court challenge when it is needed the most. Be sure, too, to advise your banks of who your agent is, this is a small thing that can save you a bunch of hassle later.
My Estate Planning has a free Lasting Power of Attorney/LPA form to help you get started thinking about how to build a document that suits your needs.
Who needs a Financial Lasting Power of Attorney/LPA?
But if you often travel for long periods of time, or have some medical conditions that might you leave you suddenly incapacitated, then you should consider putting a POA form in place. Everyone can be given that accidents or medical emergencies are never planned events in your life.
When does a Financial Lasting Power of Attorney/LPA take effect?
When does a Financial Lasting Power of Attorney/LPA end?
Most commonly, a Financial Lasting Power of Attorney/LPA ends at a point in time set in the document itself (usually a date or event) or at the moment that you pass away. After this point, your will takes over as the primary document and your executor is the most important person that manages your estate (including all finances).
Financial Lasting Power of Attorney/LPA vs Other Powers of Attorney
A Financial Lasting Power of Attorney/LPA is just one of the many types that you might want to consider as part of your planning process. Here are the different types, many of which have a very specific purpose:
1.) Limited Lasting Power of Attorney/LPA
This gives your agent a very specific range of powers (set out by you) in a specific period of time. You might be planning a long trip, for instance, and you can give your best friend the power to withdraw a certain amount of cash from your bank account to pay your bills while you are away. Once you return from your trip, the Lasting Power of Attorney/LPA ends (and your money is yours to manage again).
2.) Health Care Lasting Power of Attorney/LPA
The health care Lasting Power of Attorney/LPA is sometimes called a medical Lasting Power of Attorney/LPA that gives your agent the power to make decisions about your health care. These documents usually come with the condition that you are incapacitated in some way (by accident or illness) before the power is transferred to your agent.
3.) Springing Lasting Power of Attorney/LPA
This type of Lasting Power of Attorney/LPA is defined as more strictly so that it only goes into effect should you become incapacitated to the point of being unable to make decisions for yourself.
If you consider this type of POA be sure to include a crystal-clear definition of incapacity (late-stage dementia, for instance) so that there is never a confusion that can lead to a costly court battle.
You can also think that Powers of Attorney do different things for you depending on their:
- Specialisation. A Health Care Lasting Power of Attorney/LPA, for instance, is designed to look after your health and care issues specifically, not for the management of your financial matters.
- Purpose. Do you want your agent to have specific powers at specific times? Then a Limited Lasting Power of Attorney/LPA is what you need rather than a more inclusive ordinary Lasting Power of Attorney/LPA.
- When they take effect. Heading out on that world tour, you likely want a document that takes effect on a specific date. Worried about an accident means that incapacitation and durability are your key concerns.
- When they end. Your Lasting Power of Attorney/LPA ends at your death, but you can set dates or events that can also terminate the power of a document.
How to Establish Financial Lasting Power of Attorney/LPA
As with all aspects of preparing for your later years, there is a step-by-step process that needs to be followed to ensure that all documents are complete and accurate.
Step #1: Choose an agent
Getting a Lasting Power of Attorney/LPA begins with choosing the agent who is right for you. This is the first and most important step and there are only a couple of legal requirements to guide you in this selection:
- Your agent must be at least 18 years old
- And sound mind at the time of appointment.
Otherwise, the choice comes down to who you think can best manage your financial affairs as you would. Some basic questions you might think about before making your choice include:
- Do you trust this person fully to deal with your important financial and legal affairs?
- Is this person financially responsible? Think about how they manage their finances, for instance, to get a better sense of how their understanding of money aligns with yours.
- Will this person charge you a fee for acting as your agent? This is especially relevant when considering a lawyer or accountant for this role.
- Will this person agree to act as your agent? As always, an open and frank discussion with the person before even naming them as your agent is the best approach.
Step #2: Get a form
When you get a form from your lawyer, insurance provider, or bank, you can also choose to use a Lasting Power of Attorney/LPA template or the free Lasting Power of Attorney/LPA form available from My Estate Planning.
As with most legal documents, the cost of a Lasting Power of Attorney/LPA varies depending on your needs and how much assistance you get in the preparation.
Every application has a standard fee attached (around €85), but advisor costs can vary from £250 to more than £500 so do take your time to find the best solution for your situation.
Step #3: Have your completed PoA form notarised
Your completed Lasting Power of Attorney/LPA form should be notarised as it is a crucial and necessary step regardless of what form you are using. As mentioned earlier, a Lasting Power of Attorney/LPA is a legal document, so it must be signed, witnessed, and notarised in order to be legal and effective. A lawyer can take care of this step for you as can your local Notary Public. Most have a set fee for document signatures in the £60-£100 range, with an additional fee (usually under £10) for additional, independent witnesses.
Although not particularly complicated, the steps involved in completing the POA process can range in cost from about £200 (all filings included) to as much as £800 or more, so be sure to check around on fees as part of the POA process.
With your documents complete, signed, and witnessed all that is left to do is to register them with your local Office of the Public Guardian, a process which can take up to 10 weeks (so plan if you are scheduled for a long trip abroad).
Life is complicated enough. The hassle and cost of setting up a Lasting Power of Attorney/LPA document should never be overwhelming. Hopefully, this brief guide has sorted any confusion about the types of Lasting Power of Attorney/LPA available to you and why it is crucial to have one in place. And whether you are looking at a general POA or a durable one, be sure to follow the steps listed here to avoid unnecessary complications.
Contact My Estate Planning today to take advantage of your simple, easy-to-use online book system, especially if you are interested in understanding more about the Lasting Power of Attorney/LPA. You’ll never have a problem in using our free and easy quote function.
We encourage you to get all the facts you need before making your decision, so never hesitate to contact us if you still have questions about how a Lasting Power of Attorney/LPA works. And when you are ready to complete your Lasting Power of Attorney/LPA, we are always here to make the experience as hassle-free as possible.