Most financial planners, ourselves included, try to persuade clients to draw up wills and “Lasting Powers of Attorney”, as these are the building blocks for any realistic strategy to protect family wealth. Whilst Wills deal with our assets on passing, Lasting Powers of Attorney (LPAs) relate to decision making and mental capacity during your lifetime.
We all make hundreds of decisions for ourselves daily. However, if we lose capacity, for any reason, then someone else must make decisions on our behalf. Without LPAs in place we may end up with a nominated ‘Deputy’ making decisions ahead of family members and at great trouble and expense.
Who would you wish to make decisions for you, if you couldn’t, trusted family/friends or a complete stranger? Would you want to spend up to £10,000 for the privilege of having a deputy appointed and do you have the three months to a year to wait?
“This is the acid test question and is the reality of the position, depending on whether LPAs are in place or not” says Nigel Tollit, Private Client Adviser of Castle Will Writers.
LPAs are particularly important for property owners and business operators. If a business operator loses capacity, without making LPA provisions, there is a real danger that no-one can pay the staff or the bills and that the business will cease all together. The creation of a Business Lasting Powers of Attorney covering property and financial affairs can protect against such a disastrous eventuality.
With one in three people over 65 developing dementia*, losing capacity at some point is not a remote possibility in this day and age. Add the dangers of losing capacity by stroke, road traffic accident or even a simple fall and it starts to seem foolhardy not to have a Power of Attorney in place!
Imagine the situation where a family’s income bearing assets are held by the head of the household alone. This is a likely situation for a landlord who has bought properties over many years and is now living off the rental income.
A property cannot readily be sold if one of the owners has lost mental capacity and LPAs aren’t in place. A transfer will require an order of the court, which is likely to cost at least £2000 and takes a considerable length of time.
For all the time up to the appointment of a Deputy, rent agreements cannot be legally entered, legal action for non-payment of rent has the be stayed, no sales or purchases of properties and it is highly likely that the bank, if any properties are mortgaged, will be pressing for full repayment. It is not hard to construct a scenario where the owner, even if they regain capacity to act, will be subject to a forced sale of the property portfolio at a significant undervalue.
A full set of Powers of Attorney for one person will cost £220 in filing fees with the Court of Protection, plus whatever you have paid to have them drafted. Given the potential cost of not having them in place and the significant likelihood of needing them at some point, this begins to look like the bargain of the century!
If you would like to know more about how we can help you plan and realise your financial goals, then contact us at info@martin-redmanpartners.co.uk or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.
* NHS Choices, http://www.nhs.uk/Conditions/dementia-guide/Pages/about-dementia.aspx