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Understanding Power of Attorney

If your parents are still of sound mind but want to give you or someone they trust the authority to make decisions about their finances they can set up an Ordinary Power of Attorney.

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Ordinary Power of Attorney

Ordinary Power of Attorney is only valid while they have the mental capacity to make their own decisions about their finances. The power given can be limited so that the attorney only deals with certain assets, for example, a bank account, but not their home.

It may be useful to set up an Ordinary Power of Attorney if your parent is going away and they want someone to deal with their bank account in their absence. It does not need to be registered before being used.

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Lasting Power of Attorney (LPA)

A better option may be to consider setting up Lasting Powers of Attorney (LPA) and here’s a short video from our legal experts Ashtons Legal to tell you more ….

A Lasting Power of Attorney (LPA) continues to be valid if your parent loses their mental capacity and is no longer able to make their own decisions.  It is a good way for your parents to give someone they trust the legal authority to make decisions when they are no longer able to do so themselves.  There are two types of LPA:

Property and Financial Affairs LPA to cover decisions including:  selling a home, paying the mortgage, investing money, paying bills and arranging repairs to the property.

Personal Welfare LPA covers healthcare and personal welfare and covers decisions including:  where your parents should live, their medical care, what they should eat, who they should have contact with and what kind of social activities they should take part in.

An LPA is only valid if your parents have the mental capacity to set it up and haven’t been put under any pressure to create it.  The LPA must be signed by a certificate provider, who is someone they have known well for a number of years or a professional such as a doctor, social worker or solicitor and it can only be used once it is registered with the Office of the Public Guardian.

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Setting up an LPA

Forms are available from the Office of the Public Guardian, or organisations such as Which?Guide to Elderly Care.   The registration process takes about 9 weeks and the LPA can’t be used until it is registered.  There may be a cost involved depending on individual circumstances.

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The Court of Protection

If someone is mentally incapable of making a particular decision at a particular time, and they haven’t made an LPA, and the decision isn’t one that can be made on an informal basis, the matter can be referred to the Court of Protection. The court may either choose to make the decision itself on the person’s behalf, or choose someone else, known as a “deputy”, to make the decision for them.

Where the court appoints a deputy to manage someone’s financial and property affairs on an ongoing basis, the deputy usually has to keep accounts, enter into a security bond, and report to the Office of the Public Guardian. The Court of Protection charges an application fee, and the Office of the Public Guardian charges a yearly fee to cover the cost of supervising the deputy’s work.

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Appointeeship

If a person is incapacitated and entitled to receive a retirement pension or other state benefits, the Department for Work and Pensions can choose an “appointee” to receive those benefits on that person’s behalf. The appointee can be a relative, friend or someone from the caring profession such as a social worker. They will be asked to produce some proof that the claimant is incapacitated, such as a doctor’s certificate. There is no fee involved in this service.

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Sources of information:

Which?Guide to Elderly Care

Age UK

Citizens Advice Bureau

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Third-party mandates

A third-party mandate is not appropriate if the account holder is losing the ability to make relevant decisions themselves. A third-party mandate is a document that tells your bank, building society or other account provider they can accept instructions about your money from a specific named person. It gives that person the authority to run your bank account (but no other financial arrangements) for you.

There are usually some restrictions on what they can do, such as not being allowed to arrange a formal overdraft or open or close an account for you. It can be a good option if you need some help managing your day-to-day banking. Speak to the bank or account provider to request a third-party mandate arrangement. They’re allowed to refuse your request.

You might also want to think about writing a Will.

How have you sorted out your family’s affairs – join our forum and let us know.