Setting up a Power of Attorney with and for your elderly parents or relatives is one of the most useful things you can do as part of the planning process for their later years. Poundbury Wealth Management explain what you need to know here.
There are two types of Power of Attorney: Ordinary and Lasting. These have superceded the Enduring Power of Attorney, although if your parents have one it might still be valid, but only to cover property and finance decisions.
If your parents or relatives are 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. It is only valid while they have the mental capacity to make their own decisions about their finances.
Ordinary Power of Attorney
The power given can be limited so that the person appointed – 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 into hospital and they want someone to deal with their bank account while there. It does not need to be registered before being used.
Lasting Power of Attorney
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, someone they know 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.
Setting up an LPA
Forms are available from the Office of the Public Guardian, or organisations such as Which?Guide to Elderly Care. The cost ranges from £49 for a self-service option upto £139 for a LPA. Upto 50% discount is available for those on low incomes and free for anyone receiving certain benefits. The registration process takes about 9 weeks and the LPA can’t be used until it is registered.
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.
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.
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 a bank account (but no other financial arrangements) for you. A third-party mandate is not appropriate if the account holder is losing the ability to make relevant decisions themselves.
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 your parents need some help managing their day-to-day banking. Different banks have different ways of managing Third Party Mandates, so it is a good idea to ask questions about accessing money from an account via a third party mandate.
Find out more
Poundbury Wealth Management LLP offers expert financial advice in investment planning, pensions planning, inheritance tax planning and long term care planning. Contact us at www.poundburywealth.co.uk or call 01305 266866.
Partner Tim Gallego is a member of The Society of Later Life Advisers (SOLLA), a not for profit organisation set up to meet the need of consumers, advisers and those who provide financial products and services to the later life market.
Please note that advice relating to Powers of Attorney will involve the referral to a service that is separate and distinct to those offered by Poundbury Wealth Management or St. James’s Place. Powers of Attorney are not regulated by the Financial Conduct Authority.
The Partner Practice represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.