Lasting Powers of Attorney required for Income Drawdown Pensions

About 1.7 million retirees could be at risk of a later life financial crisis by 2025 becuase they have not set up a Lasting Power of Attorney (LPA), a provider has warned.

 

According to Zurich, four in five retirees (79 per cent) in pension income drawdown are without power of attorney, meaning their families could be prevented from helping them manage their finances should they become too ill or incapacitated to do it themselves.

Setting up LPA means giving a family member or friend the legal authority to make decisions on an individuals behalf at the loss of a person’s own ability, for instance when they lose mental capacity.

Zurich interviewed 742 people who have moved into income drawdown since the pension freedoms, between December 2017 and January 2018.

It found more than 345,000 retirees using drawdown to fund their retirement have not set this facility up for themselves, equating to a potential 1.7 million over the next 10 years.

The outcomes could be drastic, with next-of-kin individuals forced to apply to the courts to take charge of a relative’s finances should they fall ill.

Zurich said the problem was exacerbated by the pension freedoms, which meant twice as many people are now choosing income drawdown over annuities, giving them the responsibility of managing their income in retirement.

A spokesman at Zurich commented: “Thousands of people are now making complex decisions on their pension into old age, when the risk of developing a sudden illness or condition such as dementia increases”

“Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities. The time to set up a LPA is well before you need it, and pension providers should be highlighting this to their customers.”

According to the Alzheimer’s Society, there are 850,000 people currently living with dementia in the UK. This could increase to one million by 2025, and potentially double to two million by 2051.

Despite this, Zurich found a mere one in five (21 per cent) people who have moved into income drawdown since the pension reforms were introduced, have registered an LPA.

However, it did find that people with a financial adviser were almost four times more likely to have an LPA than those who had not sought advice (66 per cent vs 17 per cent).

A spokesperson at The Alzheimer’s Society indicated the stigma around the LPA was compounded by its links to mental capacity, as individuals are generally reluctant to consider a future where they may not be able to make their own decisions.

But she said: “In cases where LPAs are not in place, assets and equity may be lost, or those in a vulnerable position may be forced to make decisions they are no longer able to make.”

“We need to get to the stage where a LPA is taken out as a standard practice, with financial services advising people to do this as early as possible.”

There are two types of LPA, one covering health and welfare and the other covering property and financial affairs.

Both types of LPAs are extremely important, as whilst it’s possible to get a deputyship after the event, it is impossible to manage a pension income drawdown strategy where the pension holder has lost capacity, without a LPA in place.

 

Contact us here to discuss how we can help set up your Lasting Powers of Attorney

 

 

Lasting Powers of Attorney – Investigations into Attorneys and Deputies up 45%

Investigations into the actions of attorneys and deputies appointed under the Lasting Power of Attorney (LPA) procedure soared by more than 45% in the past year, figures have revealed.

 

According to figures from the Office of the Public Guardian (OPG) 1,729 investigations into the actions of attorneys and deputies were carried out in the 2017/2018 financial year – up from 1,199 the previous year. The Office of the Public Guardian (OPG) is a part of the Ministry of Justice (MOJ) responsible for administering LPA’s.

The figures were published after a FOI request by pensions and investment firm Royal London. The company had noted a rise in ‘DIY and online submissions’ for LPA’s, potentially leaving people at risk of attorneys making mistakes or, ‘in the worst cases, abuse’. Royal London has called for more information and education on what duties and powers individuals can and cannot do under a power of attorney.

Helen Morrissey, personal finance specialist at Royal London, says: “When done properly, the attorney fulfils a vital role in safeguarding the interests of the person they are acting for. However, the sheer number of investigations into the actions of attorneys is concerning and action needs to be taken to curb poor practice.”

She adds: “While there have been instances where people appointed as attorneys have used their position to steal money from the person they are acting for, there are also instances where the attorney has unwittingly stepped beyond the boundaries of their responsibilities or have neglected to keep up to date records explaining what they have done and why. People taking on these responsibilities need clearer guidance on what they can and cannot do.”

While many mistakes may be innocent, the Office for the Public Guardian has the power to suspend attorneys and deputies if it suspects foul play. In the most serious cases attorneys have been jailed for their actions.

LPA agreements allow ‘attorneys’ – often a person known to the individual setting up the LPA (the ‘donor’), to manage their health & welfare and property &  financial affairs should they lose the mental capacity to do it themselves. If an LPA is not agreed by the time a person loses mental capacity, deputies are appointed by the Court of Protection, which is usually an expensive and lengthy process.

Creating a LPA without expert legal advice could result in thousands of pounds of costs later down the line to rectify mistakes and leave people susceptible to financial abuse. Involving a legal expert in the process of creating and registering an LPA ensures that the donor’s best interests have been accounted for. It also ensures that a donor has considered all options and if necessary, put in protection clauses in the LPA. This specialist approach can minimise bad practice and improve desired outcomes for those individuals at risk from incapacity in the future.

 

Contact us here to book a no obligation consultation to discuss your LPA requirement’s .

 

The true cost of not having a Lasting Power Of Attorney in place.

Contrary to popular belief, no individual has an automatic right to manage someone else’s finances, even if they are related to them, or are their spouse or civil partner.

So, what happens when you can’t manage your financial affairs due to ill health and nothing has been put in place? The truth is it’s an expensive, lengthy and time-consuming problem to resolve.

For many individuals, Wills and LPA’s ( lasting power of attorney ) along with many financial products, sit in the category of ‘I will do it tomorrow’ and often it takes a professional adviser to give the person the nudge required for them to take the necessary action.

 

State of health

Many health conditions prevent people from being able to manage their finances. The two most common are dementia and stroke, and the numbers are quite stark. Some 2% of people aged 65 to 69 have dementia, by age 85 to 89 it’s 20%. And, there are approximately 152,000 strokes in the UK every year.

A sensible approach should be that when any individual puts in place a financial product for themselves, they should also explore what would happen if they were unable to deal with their financial affairs themselves.

This is because if you are no longer able to manage your finances due to health reasons, no one else can do it for you without legal authority. This is also true if you have joint bank accounts.

Most people assume that if their partner suffered a stroke or developed dementia then they could carry on operating the account and would have access to things like their pension income which may go through that account.

However, guidance from the British Bankers’ Association means that banks will often freeze joint accounts if one of the account holders is mentally incapable unless a lasting power of attorney is in place or a Court of Protection order has been obtained. The reason given by the banks is that joint accounts can only operate if there is continuing agreement of both parties – plainly this can’t happen if one party is not capable of agreement.

 

The Court of Protection

So, without a lasting power of attorney the first thing that must happen is someone will need to apply to the Court of Protection for a ‘property and financial affairs deputy order’. This allows a deputy or preferably deputies to deal with your finances.

It is advisable for more than one person to apply, because if only one deputy is appointed, and they couldn’t act for any reason (for example, being on holiday, becoming bankrupt or death), then you would be back to square one.

Appointments are usually made ‘jointly and severally’, which means that any one deputy is able to act independently at any time.

The Court of Protection prefers family and friends to be deputies, however, if there are family disagreements or if your assets are complex, it may be best to appoint a solicitor or legal professional.

While the court forms are available on Gov.uk many people do ask solicitors or legal professionals for assistance as the process is complex. The court require information regarding your assets, income and liabilities, a medical certificate and a declaration by each deputy to confirm they are suitable and will undertake their duties properly. It’s worth noting that many NHS doctors will not complete the medical certificate, and those who do may charge up to £300.

Typically, it takes about a month to obtain the information and complete the forms.

 

Typical costs.

Some £400 is payable to the court, and it takes a further month for the court to issue the formal application. Your proposed deputies need to notify various family members, including yourself, even though you may not understand. This gives everyone a chance to object to the appointment of a deputy. You plainly have no control over who might do so.

Assuming no objection, the court requires an insurance bond which pays out should a deputy illegally take your money. For £300,000 cover the annual premium is about £225. With the bond in place the court issues the property and financial affairs deputy order along with guidance for the deputies.

A separate bank account needs setting up to manage your financial affairs. And your deputies will send the order to all the institutions that you have dealings with.

The Office of the Public Guardian will charge a fee of £100 to consider what supervision level the new deputies should be allocated to. There is also an annual supervision fee of £320 year for assets of over £21,000 and £35 if less.

This whole process takes about six months and is considerably more expensive than having a lasting power of attorney in place before a need arises as the typical example in the table below shows.

The table also shows an indicative cost for a single individual, based on one year and five years, being an indicative life expectancy. It assumes legal advice is taken for both matters. It also assumes no on going legal support.

 

Financial Lasting Power of Attorney Fees Attorney via Court of Protection Fees
Year 1 Year 1
Solicitor (inc VAT) £780 Solicitor (inc VAT) £2,100
Court Application £82 Court Application £400
Medical Certificate £300
Supervision level £320
Insurance Bond £225
Year 1 total £864 £3,345
Subsequent years £0 Annual Supervision Level £320
Annual Insurance Bond £225
5 year total £864 £5,525

 

 To talk to us about setting up your own LPA, please contact us here.

 

Planning ahead – Health & Welfare.

Around one third of people in the UK have made no provision for old age, whether through a pension, writing a will, saving for retirement, making funeral plans or creating a lasting power of attorney, according to new research.

By 2025, more than 13 million people who are at risk of mental incapacity will be unprepared, with no legal or medical plans in place for their future care.

The taboo remains –talking about death and end of life is putting individuals and their families at great risk of a whole range of problems in the future.

It is true that more and more of us are putting wills in place and establishing plans for finances and assets, however far too few of us are planning ahead for our health and care needs and wishes, leaving this to chance.

Planning ahead by talking to family or friends shouldn’t be seen as doom and gloom, it’s about having a positive conversation about welfare, empowering your loved ones and making the decision-making process easier for everyone.

 

Planning ahead

Dementia is the biggest single cause of death in England and Wales and the number given a diagnosis of the condition has risen by 54 per cent in ten years. While three quarters of the population fear dementia or the loss of capacity to make decisions, 97 per cent have not made relevant legal provision.

Planning ahead is surrounded by worrying misconceptions. Some 65 per cent of people incorrectly believe they can leave decisions to their next of kin, without making the decisive legal steps to ensure that happens.

There are currently 928,000 health and welfare lasting powers of attorney (LPAs) registered with the Office of the Public Guardian (OPG) across England and Wales, compared to the 12 million people over the age of 65 who run the risk of developing dementia – a difference of nearly 93 per cent.

This disparity will continue, leaving millions in limbo. By 2025, it’s estimated that more than 15 million people will be at risk of mental incapacity and only an estimated two million health and welfare LPAs will be in place.

Jeremy Hughes, the chief executive of Alzheimer’s Society, recently commented on this issue: “Lasting powers of attorney for health and welfare too often get overlooked. People with dementia have the right to make choices about their care, just like anyone else. Making someone they trust their attorney for health and welfare is one of the ways people can do this ”

“A health and welfare LPA provides reassurance to them and the act of creating one can start useful conversations about the future with family and friends.”

Contact us here to find out how we can help you with a Health & Welfare LPA

 

 

Your Business and the Protection of a LPA ( Lasting Power Of Attorney)

Business continuity is one of the key elements in business planning. As a business owner the main objective is to ensure the efficient running of the business in the event of any disruption which could happen if you were unable to make decisions. This may be if:

  • You were to have an accident
  • You have a medical condition that incapacitated you
  • You were abroad on holiday or business

 

What would you do if you couldn’t make the day to day decisions?

An alarming fact that very few business owners realise, is that once they are unable to manage their own day to day business affairs, there is no one else ( not even your closest family member) that is automatically given the power or legal authority to deal with these business affairs on your behalf. Access and operation of the financial affairs of the business including using the bank accounts is not permissible. Without a Business LPA in place it is possible that:

  • Bank accounts would be frozen particularly those with overdraft facilities
  • Uncompleted transactions would not be finalised
  • Contracts become voidable
  • Stock could not be purchased
  • Employees salaries are not paid
  • Creditors do not get paid
  • Loans default
  • Rent or mortgages go into arrears

Without a Business LPA in place an application would have to be made to the court of protection to appoint someone to run the business, a process that usually takes months and costs thousands of pounds. The business may be irreparably damaged due its financial and operational failings by the time this decision is made. The court makes the decision on who should be appointed to run the business, not the business owner. This may result in a individual being appointed who the business owner does not approve of or prefer.

 

A Business Lasting Power of Attorney

Having someone that has the legal authority to deal with these matters can be essential to the health and survival of the business without any delays. By putting a Business LPA in place you appoint an individual (Attorney) you trust to deal with your affairs whenever you need them to act on your behalf. It makes sense to appoint someone who is familiar with the business, this could be a business associate or partner or may even be a family member who understands the business.

You can choose how many Attorneys you would like to appoint and it is possible to appoint just one Attorney. However, if this Attorney dies or becomes mentally incapable or even bankrupt, then the power ends and you would need to make a new document again provided you are able to do so. It is always advisable to appoint a replacement Attorney in the event that the first and only Attorney is unable to act.

Alternatively, you can appoint two or more Attorneys and you may choose on how they act on your behalf:

  • Jointly – this means they will always act together. This ensures that your Attorneys will have to agree on everything and act together at all times. If one of them is unable to act or dies, then the power ends because the other Attorney cannot act alone.
  • Jointly & Severally – this means that your Attorneys can act together but can also act independently of each other if necessary. This type of appointment is more flexible because if one Attorneys is unable to act, the other has a right to act on their own.
  • Jointly in some matters & jointly and severally in other matters. This means you can specify when your Attorneys should act jointly and when they should act jointly and severally. Again, the power would be limited as some matters could only be dealt with jointly, as mentioned above.

 

When can an Attorney act?

A Business LPA can be used as soon as it is registered with the Office of the Public Guardian, regardless of your mental capacity, provided there are no restrictions.

Whilst you are still mentally capable, you make decisions regarding your business affairs yourself. Your appointed Attorney will carry out your wishes if you can not carry them out yourself or if you instruct them to deal with some matters on your behalf, provided you have not restricted the power to be valid only if you lose mental capacity.

If you have lost the capacity to make the decisions yourself, your appointed Attorney will make and carry out the decisions on your behalf. As long as you are still able to make decisions on your own behalf, you can revoke a Business LPA at any time and you do not need to give a reason.

 

What type of business benefits from a Business LPA?

Sole Traders, Partnerships and Limited Companies all benefit from a Business LPA, however ownership structures differ from within these different business types and from business to business. With this is mind, our small business service offers a free initial consultation with you to ensure we clearly understand you, your business and your continuity plans. A Business LPA is also a tax allowable expense, so it would make sense to contact us and explore how we can help safeguard your business today.

 

BUSINESS OWNERS can contact us here.

 

 

 

 

 

 

 

Joint Bank Accounts and Lasting Powers of Attorney

There has been lots of debate recently about whether or not a Power of Attorney is relevant where clients own joint bank accounts. There is a general misconception that when one party loses capacity the party who still has capacity can still access the funds.

THIS IS INCORRECT.

The British Bankers’ Association guidance states that when dealing with a joint bank account where one party has lost capacity the bank can decide whether to temporarily restrict the account, unless/until there is Power of Attorney or deputyship in place.

Individual institutions COULD freeze an account which would be inconvenient to say the least.

WHY RISK THE POSSIBILITY?

U-PLAN’s advice (and that of the British Bankers’ Association) has always been to establlish a Power of Attorney before clients lose capacity so they are never put in a position where they cannot access their funds.

See below link to the BBA’s guidance leaflet. Please see page 9 under the heading “Dealing with a joint bank account”.

Link to the British Banker’s Association guidance

 

Get in touch with us  for more help and information.

Dementia -The importance of a Lasting Power of Attorney (LPA).

Dementia is already a significant problem for many people in the U.K. According to figures from the Alzheimer’s Society, there are currently around 850,000 people living with dementia, with that figure expected to pass the million marks by 2025 and the two million marks by 2050.

Alzheimer’s Disease International suggests that across the globe, a person will develop dementia every three seconds. One issue that worries many people as they head into their later years is what developing dementia would mean for their financial situation.

These fears were escalated during the general election, when the Conservative Party’s plan to tap into older people’s housing wealth to help cover the cost of care was dubbed the “Dementia Tax,” and was so immediately unpopular that the party backtracked on aspects of the proposal during the campaign.

A new study has found that 43% of those over-55 are extremely concerned about the financial impact of suffering dementia in later life, while almost half (47%) worry about their partner being unable to access their money.

Lasting powers of attorney (LPA) can play an enormous role in tackling the issues presented by developing dementia. The arrangements allow a person to appoint an ‘attorney’ to make certain decisions on their behalf, should they no longer be able to do so. The idea is that you appoint an attorney – a close friend or loved one – who you trust to always act in your best interests.

LPAs come in two distinct forms: a property and financial affairs LPA and a health and welfare LPA. However, it is possible to arrange both at the same time, with the same person appointed as your attorney.
In practice, your attorney will be able to handle things like bills, bank accounts, investments and property transactions on your behalf.

The study found that just one in eight of the over-55s have taken the step of arranging an LPA, though their use has increased significantly in recent years. According to figures from the Office of the Public Guardian, the number of LPA registrations have jumped from 129,000 in 2010 to 441,000 in 2015.

 

The risks of not having an LPA in place

The risks of not having an LPA in place are significant, families would need to apply to the Court of Protection for a ‘deputyship order’ which could be a lengthy process and lead to the delay of other important decisions. The whole process can cost more than a thousand pounds too, compared to the cost of arranging an LPA.

The numbers of individuals affected by dementia are set to double over the next 25 years and it is essential that families and loved ones avoid an expensive and time-consuming court process.
For anyone taking advantage of recent pension freedoms or in a drawdown equity release scheme – the risks can be dire. Money can be frozen if they do not have LPA’s until the court of Protection appoints attorneys. Access to funds via an equity release facility will be suspended  whilst waiting on the courts decision.

LPAs are not just about money, they are also about being able to make those important decisions about someone’s healthcare should the need arise. Not only is an LPA more cost effective in the long term, you are also ensuring that those who you trust the most are certain to be the ones making important decisions about your finances, health and welfare, when you need them most.

Get in touch with us if you would like to find out more.

vulnerable people

Vulnerable people need “jargon-free” legal services and more cost options

LSB research the steps needed to improve outcomes for people with dementia or mental health problems.

New research commissioned by the Legal Services Board has found that people suffering from dementia or other mental health problems would benefit from “jargon-free” legal services and advice as well as greater cost transparency.

Sixty people with mental health problems and dementia as well as those caring for them were interviewed regarding their own experience with legal services, to help LSB understand what can be done to improve service experience, accessibility and outcomes for vulnerable people.

A lot of respondents said that their legal needs were being met, however they wanted to be provided with more information from their advisers regarding costs, and to communicate legal issues through more simple English.

LSB chief executive Neil Buckley says: “Sometimes little actions can make a great difference to consumers, particularly those who are vulnerable. When providers take simple and practical steps, this can really make a difference to the consumer’s experience. Consumers can also help by speaking to their lawyer about things they could do that would help to make things easier.”

Mental health

Many of the interviewed people with mental health problems (or their carers) sought free advice from regulated providers or third sector organisations. The most common types of legal issues they have encountered were in wills and trusts, property, and welfare and benefits.

People were apprehensive about using legal services for different reasons: not being able to fully understand technical legal language, being anxious about the likely total cost, and a sense of feeling intimidated by legal professionals.

Where problems with mental health created low-level difficulties when getting legal services, respondents felt happy if they had been provided with opportunities to improve their understanding of the legal information (e.g. provided with repeated explanations and given more time) and if they had been treated with empathy.

Furthermore, they suggested that feeling listened to by a professional and being actively engaged would help them. Continuity of personnel was also an important factor.

Dementia

The majority of interview respondents sought advice from a solicitor, although some had received advice from third party sectors and used the online application service for lasting power of attorney. The most common types of legal issues faced were power of attorney, wills and trusts, and property.

Those in the early stage said they needed more communication from legal services providers due to struggling with processing and retaining information.

While people with dementia suffered with confusion and memory loss, their carers also felt uneasy due to their age and lack of knowledge and awareness of legal services and mental health problems.

Many interviewees felt more could be improved in relation to the communication of legal issues, including providing plain English written information after consultations. Some people also complained about costs, particularly the cost of a solicitor when completing applications for lasting power of attorneys.

For improving accessibility, respondents suggested “jargon-free” advice should be offered, as well as “dementia friendly” services, and transparency about costs – especially for the cost options when setting up lasting power of attorneys.

Solicitors for the Elderly welcomed the report’s findings. Managing partner at Acorn, Chair David Sinclair said: “Our accreditation ensures professionals have a wealth of training and experience to help put vulnerable people at ease when handling complex legal issues, and we encourage increased awareness and improvement of accessibility for these consumers.”