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The importance of arranging a power of attorney

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4 min read

Have you considered what would happen if you could no longer manage your financial affairs yourself, or make other important decisions concerning your health and welfare?

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Mortgage IQ Team
Mortgage IQ team

Last updated: 11 February 2022

What does a Power of Attorney do?

Having a power of attorney allows you to appoint someone to look after your affairs in the event you’re unable to do so.

Without this, it’s very difficult for a loved one to access your savings or make important decisions on your behalf.

There are two kinds of power of attorney: one for property and financial affairs, one for health and welfare. It’s simple to set them up and can save a lot of expense and headaches in the long run.

Have you considered what would happen if you could no longer manage your financial affairs yourself, or make other important decisions concerning your health and welfare?

Many people believe that their next of kin or another close relative or friend would simply be able to pick up the reins on their behalf. However, that would not automatically be the case, unless they had already set up a power of attorney.

A Lasting Power of Attorney, as it’s called in England and Wales (or Continuing Power of Attorney in Scotland and Enduring Power of Attorney in Northern Ireland), is a legal process that allows you to appoint someone else to look after your affairs for you if you’re unable to. This can be any person – or more than one person – who will act on your behalf, such as a spouse, partner, relative or friend.

If the necessary documents are already in place if or when you lose mental capacity, it’s then very simple for your attorney(s) to start making decisions and acting for you.

Because of this, it’s very important that the person, or persons, you choose are people who know you well and whom you are certain you can trust. They then have a legal duty to act in your best interests.

What is a power of attorney?

There are two different kinds of power of attorney, which are:

  1. Property and financial affairs

This allows your attorney(s) to make decisions on your behalf about matters such as managing your bank accounts, paying bills, paying for a care home or in-home care, managing your pension and investments, and deciding what to do with your property if you’re no longer living in it.

To ensure that your wishes will be followed, you can give specific instructions when you create the power of attorney.

  1. Health and welfar

This allows your attorney(s) to make decisions for you about matters such as medical care, moving into a care home, your daily routine (such as washing, dressing and eating) and life-sustaining treatment.

As with the property and financial affairs version, you can give specific instructions as to your wishes.

It’s generally a good idea to set up both kinds – and it’s important to note that each power of attorney only covers one person.

What happens if you don’t have a power of attorney in place?

If you have not set up a power of attorney, and you’re no longer able to make decisions for yourself, things can get very complicated and distressing for you and your loved ones.

Imagine, for example, you needed to access money from your savings to pay care home fees, or sell your house to cover the cost. In order for someone else to be able to do this on your behalf, they would need to apply to the Court of Protection for a deputyship.

This can take many months (usually 9 to 12) and can be an expensive and stressful process. In the meantime, all your affairs will effectively be in limbo.

Even when the deputyship is granted, it has to be renewed on an annual basis and requires an annual fee – as well as the solicitor’s bills you’re likely to have to pay on top. What’s more, the deputy has to verify and justify all of their spending and actions in detail, whereas an attorney does not. It’s even possible that an application for a deputyship could be refused.

When should you set up a power of attorney?

Too many people delay arranging a power of attorney until they’re older or it’s too late. But it’s vital not to wait until you start having problems with your mental capacity, as once that happens, you’re no longer allowed to apply for one.

There is also the risk that you might need an attorney to act for you while you’re younger, such as if you were to have a bad accident or be unfortunate enough to be in hospital for an extended period of time.

We regularly hear about clients who are in a moment of crisis but haven’t arranged a power of attorney. Their relatives are often desperate to be able to access their money – to pay for social care, for example – and also to make other important decisions, but they are unable to do so.

Unfortunately, there is absolutely nothing we can do to help them, other than guide them towards the Court of Protection and the painful process of applying for deputyship. This just adds to the nightmare that everyone is already going through.

We therefore strongly advise putting both kinds of power of attorney in place as soon as you can to ensure that, should the worst happen, at least the headache of having someone to manage your affairs will be avoided.

Fortunately, it’s a relatively simple process. We can help you with this, so please get in touch with us.

Powers of Attorney involve the referral to a service that is separate and distinct to those offered by IQ&Co and St. James’s Place. Powers of Attorney are not regulated by the Financial Conduct Authority.

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