Millions Over 75 Putting Themselves at Risk by Ignoring Power of Attorney (LPA)
A staggering 3.4 million over-75s in the UK haven’t yet arranged a Power of Attorney, leaving them vulnerable if they fall ill or lose mental capacity.
This shocking statistic, revealed by retirement specialist Just Group, highlights a worrying gap in awareness and understanding of LPAs.
- 59% of people over 75 haven’t set up a Power of Attorney.
- 35% believe they’re not “at the appropriate stage of life” yet.
- 22% fear relinquishing control of their finances.
- 6% don’t trust anyone else with their money.
- 15% have no intention of ever getting a Power of Attorney.
- 8% are unaware of its importance.
Why is a Power of Attorney so important?
A Power of Attorney is a legal document that appoints someone you trust( the attorney) to make decisions on your behalf (the donor) if you cannot do so yourself. This can cover financial and medical decisions, depending on the type of Power of Attorney you set up.
What happens if you don’t have one?
Without an LPA, your loved ones will face a stressful and potentially expensive legal process to manage your affairs if you lose capacity. This can involve applying for deputyship through the Court of Protection. This is time-consuming, costly, and often has a more limited scope than a Power of Attorney.
What are the financial responsibilities of the attorney?
Generally, an attorney cannot make any meaningful gifts to save the donor IHT (the donor being the person giving authority to the attorney to act on their behalf).
These are not generally viewed as being in the donor’s best interests. After all, they could reduce the resources available for the donor’s future needs, such as long-term care.
Of course, the donor can still make gifts if they have full capacity. If providing for family members and/or saving IHT is important, they should consider making gifts while they can.
Once mental capacity has been lost, such gifts will no longer be possible in England and Wales without application to the Court of Protection (COP).
Gifts that are allowed:
The gifts an attorney can make without application to the COP are limited to occasions such as birthdays and Christmas or to charities the donor may have previously supported.
The value of those gifts must be reasonable based on the individual circumstances.
So again, it may not be reasonable to make gifts in these circumstances if, as a result, the future financial needs of the donor may be compromised.
To be safe, attorneys should avoid making significant gifts, even with Court of Protection approval. Because they could still be considered “deprivation of assets” by local authorities.
This means the gifted assets could be counted towards the donor’s financial resources when assessing their contribution towards care home costs.
A power of attorney is essential to ensure that the donor’s investments can continue to be managed flexibly in the donor’s best interests.
It is essential that the donor should continue to have a choice of investment wrappers such as ISAs, investment bonds and OEICs. Any investment must be owned by the donor, but the attorney can sign on their behalf.
In the absence of an attorney, investments can’t be changed or new wrappers opened. This may not be good news, particularly if the donor’s loss of capacity dictates a different investment strategy to meet future needs.
Financial planning and meeting income needs:
The onset of ill-health can drastically change retirement income needs.
Some may need less income to live on as they become less active. At the other end of the scale, it could require additional expenditure to make adaptations to the family home or even the need to enter residential care.
Having an attorney in place allows greater choice over how the donor’s needs can be met tax efficiently from savings. This may include pensions, ISAs, OEICs and bonds.
Not having an attorney in place could result in them being unable to make the most of their tax allowances and paying more tax than necessary. This could mean that savings don’t last as long as they might otherwise. With restrictions on gifting, it could also preserve a larger estate for their families.
When you are in good health, it’s important to act sooner rather than later to safeguard your future.
Registering an LPA or CPA ensures that the attorneys have the freedom to act in the donor’s best interests. Choosing appropriate investments and providing income and capital when needed in a tax-efficient way.
While it’s perhaps human nature to leave these decisions for another day, acting sooner may save time, money and stress in the long run.
Consider setting up an LPA alongside your will.
How can Spectrum Independent Help?
As appointed associates of APS Legal & Associates, we can provide advice and help you set up both types of LPA. We can also act as a Certificate Provider, which confirms that you have the capacity and understanding.
Contact us today to discuss your needs.