Are you discussing Lasting Power of Attorney with your clients?
With an aging population, talking to clients about setting up Lasting Power of Attorney for clients is becoming ever more prudent, says Ivan Millerton of APS Legal Consulting
When conducting a client meeting or review it would be expected for a financial adviser to recommend, or even arrange if possible, a valid and up-to-date will to ensure that client’s wealth and wishes are dealt with on their death.
However, how many advisers do the same for their clients with lasting powers of attorney (LPA) (known as continuing powers of attorney (CPA) in Scotland)?
This is just as important. While having a will is a first consideration for estate planning, this only comes into effect on death, whereas LPAs can be needed while the client is alive. This could be due to a loss of mental capacity leaving them unable to make their own decisions, or even simply a wish to delegate.
Whatever the client’s age, an LPA is an essential document to have as it enables trusted people to make decisions for a client.
An ever-ageing population increases the risk that a client may lose mental capacity due to dementia for example, but a client of any age may suffer brain injury or physical incapacity as a result of an accident.
In either circumstance, an LPA would prove invaluable as family would be able to deal with that person’s financial matters, health and welfare.
Financial Decisions and Health and Care LPAs
There are two types of LPA/CPA – one is for financial decisions (such as property and finances) and the other is for health and care decisions (personal welfare). A client would be best advised to have both as they cover different things and each may be needed at a later time by their family.
The process to obtain either is the same, although it varies slightly in Scotland, and the arrangements must be registered with the Office of Public Guardian (OPG) so that they can then be used.
A good reason for a client to have a financial decisions LPA in place is not only to deal with things like their bank accounts, but also their pension savings especially since the advent of pension freedoms.
Clients now have greater choice for pension drawdown and without an LPA no-one could make these decisions either pre-retirement for investment strategy or at/post retirement for drawdown choices.
A health and welfare LPA enables family to take important decisions on the care of their loved one.
Without an LPA…
The consequences of not having an LPA in place are very important to consider.
Without a health and welfare LPA a family might find themselves in conflict with the local authority or NHS over their loved one’s care.
If a client loses mental capacity to look after his or her own financial and personal welfare matters, the only option in the absence of an LPA is for someone on their behalf to apply for a deputyship order via the OPG at the Court of Protection – which can be a lengthy and costly process. Until this can be obtained no decisions can be made.
Given its evident importance, financial advisers have a duty to discuss this with their clients. In doing so advisers can truly say they offer fully holistic financial planning.
First published in Zurich’s Adviser matters magazine