A recent study reported that only 1% of the UK population has a lasting power of attorney (LPA) in place. An LPA allows previously appointed family members or friends to manage someone’s finances should they become unwilling or unable to do so.
Why do so few of us have an LPA in place? Is it because we simply do not know enough about them, what they really do or how relevant they are in the current climate of pension freedoms?
Few people realise there are two types of LPAs to choose from: health and welfare or property and finance.
A health and welfare LPA only becomes active in the event of incapacity. A property and finance LPA, however, can be used at any time after it is registered, not just as a result of physical or mental incapacity.
It is important to note that different attorneys can be appointed for each LPA. For example, those making financial decisions may be different to those dealing with your health care. An attorney only becomes legal once he/she is registered with the Office of the Public Guardian.
In addressing the importance of an LPA, it is wise to discuss pension assets and equity release matters separately.
In the event of incapacity without an LPA, any funds would be held in limbo until the Court of Protection could award attorney powers to someone they deem appropriate. This is because a will only determines what will happen to funds after death.
A property and affairs LPA deals with pension matters for any funds held in the sole name of an individual. An LPA is relevant no matter how the funds are invested, whether still in the main pension or in drawdown.
An LPA can facilitate withdrawal levels and investment strategies, as well as adapting to ongoing needs over time.
With equity release drawdown plans, each time a further draw of funds is required, all named borrowers must be able to sign. LPAs are essential to securing ongoing access to further funds from a drawdown plan.
If you rely on access to pension assets or funds, blocking access could have a devastating impact on your finances.
We have a responsibility to advise our clients — be that releasing equity from their homes or recommending retirement strategies — to ensure that we are protecting their interests.
All too often we focus on the impact of death, which inevitably has a serious impact on all related parties. However, the impact of mental or physical incapacity can be far more serious.
We will review your existing provisions and, if necessary, facilitate the arrangement of a will and/or power of attorney.
We strive to be a core part of your financial planning process and will advise you on the need to look beyond pension planning or investments and discuss the stark implications of incapacity and death.
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