Article written by Charlotte Warren, Private Client Solicitor
There are few certainties in life, but as Benjamin Franklin famously wrote, two things we can be sure about are “death and taxes”. However, planning for our ultimate demise, or our decline along the way, is something we frequently ignore and put off for another day.
One of the main reasons for this is because thinking about death is difficult and complicated. Some worry about the costs involved, while some people believe there is no need.
Recent research from the National Will Register found that 42% of adults in the UK have not spoken to anyone about what should happen to their estate when they die, and a quarter of those surveyed said it was too ‘morbid’.
When questioned about their later life planning, around a fifth of those aged over 55 said they were not dealing with the issue because they had no concerns about what happened when they had gone.
Without a Will, you cannot ensure your family will be cared for in the way you would wish. This is particularly relevant for cohabiting couples. There is a persisting myth that a ‘common law’ partnership will provide security for couples who have not gone through a marriage or civil partnership ceremony. However, without a Will, nothing passes to the surviving partner. Instead, it will all pass to children, or if there are no children, it will go to family, such as parents or siblings.
If you are not married and have significant assets such as property in sole names, a Will should be a priority. This is also particularly important for couples in second marriages, with children from previous relationships.
The other vital element of planning for your future is to think about who would manage your affairs and make decisions if you have an illness or accident that leaves you incapable of looking after things yourself.
People do not want to think about how they may potentially lose themselves or a close relative to dementia, but the statistics indicate that one in two of us will be affected by dementia in our lifetime, either by caring for someone with the condition, developing it ourselves, or both. The number of people living with dementia in the UK is predicted to exceed 1.5 million by 2050 according to Alzheimer’s Research UK.
It is a common myth that there is an automatic right for spouses, civil partners or children to look after finances when someone loses mental capacity or becomes unable to deal in person. However, the only certain way that relatives or trusted friends can handle your affairs is to create a Lasting Power of Attorney while you are mentally capable and to register it with the Office of the Public Guardian.
A Lasting Power of Attorney (LPA) is a document that enables you to appoint people you choose to have legal authority to make decisions and act on your behalf. It can be used when you become mentally incapable of handling matters yourself or if you simply want someone to act when you no longer wish to manage your own affairs.
An LPA for property and finance allows the person appointed to make financial decisions on behalf of the individual if they are unable to make those decisions themselves. This includes running bank accounts and paying bills as well as managing property, pension, taxes and investments. For those who are self-employed or a company director, an attorney can be appointed under a separate LPA limited to business matters.
LPAs for property and financial affairs can be used as soon as it has been registered, as long as the person who granted the LPA agrees. This means they are equally useful if an individual is regularly out of the country and wants someone to act for them while they are away, or for a person suffering from physical disability, or where someone has all their faculties but does not want to have to deal with everything themselves.
In contrast, a health and welfare LPA cannot be used until mental capacity has been lost. It covers matters such as where someone lives, decisions on medical care and consenting or refusing life sustaining treatment.
An LPA is an essential element of lifetime planning and is the only way you can be sure that someone of your choice is able to deal with your affairs and make decisions for you. However these are critical documents so it’s important to get professional advice and build in the right protections from the outset. Expert knowledge can ensure you have an LPA that reflects your wishes and protects against possible financial abuse.
Three steps to LPA confidence:
1. Choose attorneys carefully
An attorney has far-reaching powers. Problems are likely to arise if they do not appreciate the role they are undertaking, or if there are insufficient checks and balances in the process. Before appointing an attorney, think about how well they look after their own finances, how well you know them and how sure you are that they will make the right decisions for you.
2. Make attorneys accountable
You can appoint two attorneys and require that they are both involved in each decision, although that can make transactions more complicated. One option is to appoint a professional attorney to undertake regular checks on your attorneys. Alternatively, you can include a requirement within the LPA for the attorney to consult with a third party if a decision exceeds a given threshold or for specific assets. Importantly, every attorney should be made aware that they must not benefit from their position or use money or property for their own benefit, whatever their relationship.
3. Give attorneys good guidance
Every attorney needs guidance to help them understand their fiduciary and statutory responsibilities, and how to satisfy them, at the outset, including how they should consult with the person they are representing. They should be encouraged to seek expert advice, whether legal, financial or otherwise, whenever necessary.
For more information on Wills and LPAs or to discuss a particular matter further, please feel free to email me or contact the Private Client team on 020 8858 6971.