The vast majority of UK adults are yet to set up a lasting power of attorney (LPA), leaving the management of their financial and health affairs to chance.
According to new research from Co-op Legal Services, 84% of adults have not set up an LPA, a legal document that allows loved ones to make decisions relating to your health or finances on your behalf, should accident or illness prevent you making them yourself.
The research also found that more than a quarter (27%) did not know what an LPA was and that 54% did not know there were two types – one covering decisions surround health and welfare and one covering property and financial affairs.
With a dementia diagnosis being made every three minutes in the UK, one million people are forecast to have the condition by 2025, and therefore an LPA is often considered as important as a will.
James Antoniou, head of wills at Co-op Legal Services says: “We advise that an LPA is put into place at the same time as a will. Both are crucial parts of later life planning and can help to alleviate stress and worry for loved ones further down the line.’’
Without an LPA you’ll need to go to court
Many people mistakenly think that if a person loses mental capacity, their next of kin can take authority of their affairs but this is not the case. Without an LPA loved ones need to apply to court to get the necessary permissions.
This can be a lengthy and expensive process, according to retirement specialists Key Retirement Solutions. It costs £400 to apply to the court of protection and £100 to nominate a deputy. The work involved in preparing the court order costs £850 plus VAT.
The process of obtaining the court order can also take up to six months. During this time, the individual’s finances are frozen but care costs still need to be paid and direct debits cannot be stopped making it a stressful time for families.
The arrangement also needs to be reviewed on an annual basis at a cost of £320 where the estate being managed is worth more than £21,000. However, it is when the court does not approve the deputy or there is no willing deputy and a professional (most likely a solicitor) is appointed that costs can spiral. This costs £1,500 plus VAT in the first year and £1,185 a year thereafter.
It is far cheaper to set up an LPA. The forms can be downloaded from gov.uk and cost £82 to register. Alternatively, as with wills, you may prefer to use a solicitor. Packages combining wills and LPAs start at around £300.
Dean Mirfin, technical director at Key Retirement Solutions, says: "The implications of not having LPAs can be catastrophic. It is typical for the process of establishing the relevant authority to take months, but it can be extremely expensive. If more people knew the costs many more would set up LPAs long before they may be needed.
"Not only is it more cost effective to do so, you are also ensuring that those whom you trust the most are certain to be the ones making important decisions about your finances and your health and welfare when you need them most."
Partial LPA refunds to be paid
In related news, according to a report from the Office of the Public Guardian, thousands of people who have registered an LPA in the last four years could be due a partial refund of their registration fee. The report claims that before the fee was reduced from £110 to £82 in April this year, it was greater than the operational cost of registering the LPA. The Ministry of Justice has said it will refund the excess but details of how this will happen are yet to be released.