Power of attorney is a phrase you may well have heard of, and you may have a rough idea of what it is, but what does it actually mean, and who and why might someone set this up?
First things first, power of attorney is an important legal arrangement/important legal document. In a nutshell, giving the responsibility of managing your affairs to somebody else, allowing that person to make decisions on your behalf if you are unable to do so, either due to illness, injury, or incapacity. This can cover life-sustaining treatment, medical care, and your daily routine, for example, washing, dressing, plus managing your finances.
There is more than one type of LPA (lasting power of attorney) in the UK. The different types of power of attorney are:
Property and financial affairs LPA: This gives your attorney the power to manage your money, property, and other financial matters.
Health and welfare LPA: This allows your attorney to make decisions about your daily routine, medical care, and end-of-life treatment if you lose mental capacity. It's set up for the best interests of the person involved.
You can choose to nominate someone to handle either type of power of attorney or both if you wish. The person or persons you nominate to handle your affairs are known as ‘attorneys’; not to be mistaken with the American term for solicitors.
My partner works for social services within a hospital setting and meets daily with people who, for whatever reason, haven't set up power of attorney and whose affairs are in a real pickle. People don't know that person's wishes, may disagree with the hospital's/local authority decisions and feel that the person involved would want things done differently, and/or are unable to help with financial issues surrounding that persons life/care.
Let’s look at these issues in a little more detail.
Let's say you're in hospital following a stroke and are unable to manage your money, investments and property yourself. Having already nominated someone to deal with these issues on your behalf means you've already had discussions with that person, and they are able to manage your financial matters according to your wishes. This might be as simple as being able to access your bank accounts to pay bills, be able to sell your property/possessions if deemed necessary, speak to the Department For Work & Pensions to alter benefits claims due to changes in your circumstances or set up new claims for help as a result of your current situation.
The nominated person or persons (you can have more than one person nominated, and if more than one, they'll all need to agree and authorise any financial decisions that need to be made, which may be better for larger or more difficult financial situations), will have full control over important decisions that need to be made.
It can be arranged for nominated 'attorneys' to decide some matters jointly, but other matters can be decided by a single, nominated person, separately or together - sometimes called ‘jointly and severally’ - which means attorneys can make decisions on their own or with other attorneys
If you haven't set up any sort of LPA, and lack mental capacity to look after yourself or manage your financial affairs, you, and your family have limited choices and actions you can take towards your care or finances, and more.
As it stands, nobody else, even a close family member such as a partner or wife/husband, is legally/formally allowed to access your bank, access your money, make decisions on how your money is used, or pay your bills for you, if you can't. The DWP can't speak to them, so they cant discuss benefits or help that may be available to you and your family, and they can't speak to any of the suppliers of your services, such as TV, council tax, or your utility providers, mortgage company, nor officially your landlord, should that be relevant.
As next of kin of that person, you may assume that you can make decisions for them if incapacitated, but this simply isn't the case unless you have set up an LPA in advance of the loved one being unable to make decisions. At this point, the only option the family have to be able to manage your affairs is to apply for deputyship via the court of protection (subject to a court fee), which might take some 4 to 6 months to happen.
In the meantime, you are unable to manage what is deemed as the normal 'admin' of your life, nor is your family, and potentially bills aren't being paid, and your credit report could be affected, which might not seem relevant at the time, but if you do recover enough to be able to manage your affairs again in the future, you suddenly have some big black marks on your credit report that could affect your current, and future financial situation.
What happens to me if I'm ill and don't have LPA (lasting powers of attorney), set up?
If you lack mental capacity to understand and manage your finances and make decisions about your health and care needs and have not appointed an LPA, no one has legal permission to manage your affairs or make decisions for you.
The hospital/social services will carry out a mental capacity assessment. This is to determine your state of mind and to see if you have the capacity to understand and manage your finances/affairs.
Assuming that it has been decided that you aren't currently in a position to make sound financial decisions, and there is no LPA in place, if you have no one willing and able to apply for deputyship, the local authority will apply to the court of protection to take control of your finances and make decisions for you. This is normally a last resort.
In the meantime, you are now in a position where the hospital is ready to discharge you, but you can't make decisions. The local authority will then assess you to see if you could go home with a suitable care package or if you need placement into a residential or nursing home.
Local authorities have a duty of care to meet somebody’s care needs, but only the resources to offer the most economical option for doing this, this may well mean that although they agree that sending somebody home and offering an at home care package may be better for the person and family, they may not be able to offer this as it’s more expensive than a care home offering the same level of care at a cheaper cost.
Without an LPA in place and needing to go into a residential home you'll likely be placed into the cheapest and most local home available to the local authority. There is never a guarantee that there will be availability in your very local area, so a person may be placed some distance from their family. With no LPA, and even though your family know you wouldn't be happy/would be against your wishes to be placed in a care home, or which care home, the family wouldn't have a choice unless they had the funds to pay.
The local authority would pay the fees on a care package they had put in place on your behalf. The local authority have a fee guidance to the maximum they can pay for residential care and not all care homes will accept this fee which limits which homes are available to local authorities.
Care packages are expensive. As an example, in Surrey, two 30-minute care visits a day at home would cost £200 a week on average. Four visits a day with two care workers would be around £900. Residential care homes would be around £1,000 per week (although it could be cheaper elsewhere in the country), so family funds/savings, when potentially paying up to £4,000 a month, may not last very long!
If you have over £24,500 in assets, which could be savings, a private pension, shares, premium bonds, 2nd homes, half of a joint account for home care, or £23,000 for residential placement, once your family or the local authority had been through the legal process and been made the nominated LPA decision maker, the local authority will then expect to be paid back what they've paid out for your care, as you'd be classed as self-funding because you have what is deemed to be enough funds to be able to pay for your own care.
Assets might also be indirectly affected by someone elses finances. A real-life example of this is a man whose wife had received a lump sum of retirement money. He put the money into premium bonds for her, all in his name, as he managed their money. He became unwell and needed care, and all the money in the premium bonds was in his name; this classed him as a self-funder, and those premium bonds had to be cashed in to pay for his care, even though it wasn't actually his money, it was his wifes! It is a good example of why it can be very important to keep your money in your control and in your name!
Obviously, if you are deemed eligible and able to self-fund, the LPA decision maker can then choose to change your care package/care location to whatever they believe will be in your best interests or what you would most likely prefer.
If you aren't able to self-fund your care, and LPA has been granted, you would still be expected to pay a contribution towards your care package, depending on your income.
What does it cost to set up a LPA, and how do you do it?
Setting up a power of attorney typically costs between £82-£500, depending on whether you use a solicitor or do it yourself online through the government's service. There is a legal requirement that you must be of sound mind when applying for the LPA and able to make your own decisions and not be being forced/immorally persuaded into taking out the LPA by anyone else. These aren't just for older people to take out; it is sensible to have such an arrangement in place from an early age, as you never know what is going to happen to you. If you were hit by a bus tomorrow and ended up in hospital and weren't able to make decisions, who would be able to do this for you? In my position, nobody could, and the same for my partner; I couldn't even access our bank account as it's in my partner's name even though my wages go into the account, so that's a big problem as bills wouldn't get paid, so an LPA is probably a very good idea for us, and I'm not classed as 'old' yet (unless you ask my kids).
Anyone over the age of 18 can be appointed as an attorney as long as they are not bankrupt or subject to a debt relief order. Your attorney does not need to live in the UK or be a British citizen. Many people choose a trusted family member or friend, but you can also appoint a professional such as a solicitor. If significant sums of money are involved, it is a good idea to consult legal experts such as a solicitor, as these types of larger estates may be complex and so legal advice is recommended.
The power of attorney must be registered with the Office of the Public Guardian before it can be used, which takes around 4-20 weeks, and the registration fee to do this is £82, but it’s free for people on means-tested benefits, and there is a 50% discount for people who earn under £12,000 a year. Once registered, the attorney can start making decisions on your behalf, either immediately or when you lose mental capacity, depending on the type of power of attorney.
You can use the gov.uk website to fill out the standard form online,(or download them). This a diy option, so you do it all yourself. You'll then need to sign the forms with your attorney (s) and have someone witness the signatures. A witness must be over 18 years old and not stand to benefit from the LPA or could be seen to be in any way involved with the person involved. There'll be legal fees, but getting a solicitor to witness the signature is wise; it's usually around £25 or so and takes little time.
There are several companies that will help guide you through setting up an LPA online. This can be useful as the online service application will help guide you through the document, giving you advice and information, and once completed, it will be checked over before the LPA document is sent to you for signing. You then submit the form to Office of the Public Guardian via the gov.uk website. This is often a faster way to set up an LPA as it is less likely to contain errors, which might slow down the process with the Office of the Public Guardian. The average cost for this is around £100 for a basic LPA application. This fee is on top of the £82 registration/ application fee.
There may be different options/rules for those outside of England, such as Northern Ireland or Scotland.
More complex cases, or ones where you have specific needs, or where special provisions, or you need to add an expiry date that needs to be factored in, are best dealt with by experienced power of attorney solicitors. There are also online options for this, and companies such as The Co-op and other legal services offer fully managed LPA services as well as face-to-face/video chat advice, with prices starting at around £354. The first step for finding a company to help you with the process, is to look for personal reviews from previous customers to make sure the company you have chosen has a good reputation. Trustpilot is a great way to find honest reviews.
Overall, setting up a power of attorney is an important way to ensure your best interests are protected, and your wishes are followed if you are ever unable to make decisions for yourself. It is a relatively straightforward and affordable process that can provide significant peace of mind.
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