Should you setup a Lasting Power of Attorney to let someone else manage your money?
By Mike Narouei, Content Producer at Boring Money
2 July, 2021
Because we’re all living longer, age-related mental illness is increasingly common and although it isn’t something many people want to think about, planning ahead might be a smart choice.
Lasting Power of Attorney (LPA) is legal concept but essentially it means appointing someone else to manage your finances if you aren’t able to do so.
Because we’re all living longer, age related mental illness is increasingly common and although it isn’t something many people want to think about, planning ahead might be a smart choice.
There are two types of LPA (https://www.lastingpowerofattorney.service.gov.uk/guide#topic-the-2-types-of-lpa). One allows the person to appoint someone to manage just their finances, the other involves healthcare decisions. We’re just going to look at the former here.
Why would you want an LPA?
It is your money, right? Why should somebody else have the power to control it?
The main reason for putting an LPA in place is so that you’re protected if you lose mental capacity, for example if you suffer from dementia in the future.
Sadly, this kind of condition affects many people, particular in later life, and it can leave them vulnerable to exploitation. Putting in place an LPA – someone you trust to take care of things on your behalf if needed – gives you some certainty and reassurance.
You might also decide to setup an LPA if you know you’re going to be out of action for a while, for example if you need to live abroad for an extended period and want someone to be able to sign financial papers on your behalf.
Choosing the right person may not be easy. It needs to be someone you trust and that you feel can make sound judgements on your behalf. It is worth taking time to think it through carefully and perhaps speaking to an expert as well.
Is it common?
People often setup an LPA at life stage trigger point– like many decisions concerning money, we’re promoted to think about our financial affairs because something else happens to us in our life. The Office for the Public Guardian (they oversee LPAs) say that becoming a parent or making a Will is often a trigger for setting up an LPA (https://publicguardian.blog.gov.uk/2021/06/17/looking-at-the-customer-journey/).
And the number of people registering an LPA has increased significantly over the last decade. Before the pandemic, nearly a quarter of a million LPA registrations were filed in the final three months of 2019. At that rate, close to a million LPA arrangement would be put in place each year. That’s a lot!
So you certainly aren’t alone if you decide to put an LPA in place. Although, as the chart below shows, there has been a decline in the number being registered during the pandemic.
This might be partly explained by the fact that an LPA needs to be witnessed in person (https://www.gov.uk/guidance/making-and-registering-an-lpa-during-the-coronavirus-outbreak) – meaning someone impartial has to sign to say you’re not being put under pressure to appoint an LPA – which has been more difficult during the pandemic for obvious reasons.
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Source: Family Court, Ministry of Justice (https://www.gov.uk/government/statistics/family-court-statistics-quarterly-january-to-march-2021/family-court-statistics-quarterly-january-to-march-2021)
How can you set up an LPA?
You can register an LPA online through the government website here (https://www.lastingpowerofattorney.service.gov.uk/home?_ga=2.198586089.752088105.1625046936-410182313.1618323100). There is a slightly different process in Scotland and Wales, compared to England.
Fair warning - there is some legalese to get to grips with through the process. For example, ‘donor’ means the person that is appointing someone else as their LPA. But the digital portal takes you through the process and helps explain things.
You will still need to get the forms signed as part of the witnessing requirement, so it cannot be done entirely digitally.
It might be wise to seek some advice, perhaps from a solicitor, or a financial adviser may guide you through this as part of building a plan for your finances in later life. You can use our Boring Money Advice tool (https://boringmoneyadvice.co.uk/find-an-adviser/) if you want to speak to a financial planner.
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