Graysons Solicitors In The Press

Time to look to the future

The law which governs how a persons finances are handled in the event of them losing mental capacity, for example through Alzheimer’s or another form of dementia, is changing in October this year. Tens of thousands of people could be affected financially by the change as the legal costs associated are projected to increase greatly, possibly pricing some people out of the scheme altogether.

At present it is quite common for older people to take out an enduring power of attorney (EPA) which hands over control of their financial affairs to a family member or friend at the point that they become mentally incapable of managing things themselves. This is currently a relatively straightforward legal document which costs around £110, and is often drawn up by a solicitor at the same time as making a will.

However, from the 1st of October EPA’s are being replaced by lasting powers of attorney which will provide scope for someone to hand over control of not only their property and finances, but also to enable the appointed person to have a say in their health, welfare and medical treatment. David Coffey, Partner at Graysons solicitors explains “The legal work under the new rules will be more complex and time consuming and therefore more expensive. While the actual costs are not yet known, some bodies are projecting that the costs will increase fivefold over present rates.”

Here David explains what a power of attorney does and how the law will change things in the future.

Q. Why do I need an enduring power of attorney?

A. When someone loses mental capacity, their relatives can have problems dealing with their finances as they are not authorised to deal with bank accounts, property transactions or sign other official documents. An enduring power of attorney is a legal document in which you hand over to someone else the power to decide what is done in relation to your finances and property.  The person you appoint is known as your attorney.  Anyone can make an EPA as long as they understand what it does. You may specify your attorney’s authority to act on your behalf only commences when you lose your mental capacity, for instance if you developed Alzheimer’s or dementia, or if you suffered an accident or stroke. Your attorney can use your assets for people you might have been expected to provide for and has a duty to act in your interests at all times. The benefit of making an EPA in advance is that you get to choose who will handle your finances in the future, rather than having it decided for you by the courts after the event. You can also save your family from having to go through an often long and complex application to the Court of Protection.

Q. What will be the difference under the new law?

A. Under the new rules the government will replace EPAs with lasting powers of    attorney (LPA). An LPA makes provision for people to choose someone to manage not only their finances and property should they become incapable, but also to be involved in making decisions regarding their health and medical treatment, including end of life treatment. Different attorneys can be named to make different kinds of decisions, for example one attorney may be nominated to make financial decisions and another could look after your medical treatment. The medical treatment aspect of the LPA in particular is likely to be very complex and may involve a lot of discussion between the parties involved. The person making the LPA will need to state their wishes in detail as to what medical action should be taken in a variety of situations.  Due to the broader nature of an LPA and the much wider powers involved it will be more expensive to have drawn up at the outset.

Q. What happens if I become incapable of managing my own affairs and I    haven’t prepared an Enduring (or Lasting) Power of Attorney?

A. If you become mentally incapable of managing your own affairs the initial problem your family face is that they will be unable to access your bank accounts or deal with other transactions which require your authority. An application then has to be made to the Court of Protection for someone to obtain authority to take over and manage your finances. The person appointed to do this is called a Receiver and is usually a family member or close friend, although anyone concerned about protecting your assets can apply. The difference in these circumstances is that you have no control over who will be appointed to manage your finances and it may not be the person that you would like. Applying to the Court of Protection can be a difficult and costly process and this is best avoided by preparing a power of attorney in advance.

David says “We are concerned that many people are likely to be deterred from taking out a lasting power of attorney because of the higher cost. This means that the loved ones of someone who loses mental capacity will be forced to apply to the court of protection after the event in order to get authority to deal with their finances. In the long run this will be more expensive and can leave family members in financial limbo during the application process.”

The good news is that enduring powers of attorney taken out before October will remain valid after the change takes place. “We recommend that anyone who has not made an EPA should give serious consideration to doing so before the change” says David.

Graysons deal with Wills, Inheritance tax planning, powers of attorney and probate along with many other areas of law. They can be contacted on 0800 048 0766 or via www.graysons.co.uk

Click here to read more information about Lasting Power of Attorney