Sarah Penells discusses Power of Attorney
Power Of Attorney
Money expert Sarah Pennells writes for us.
NO-ONE likes to think about their own death. It is one of the reasons why many adults don’t get round to drawing up a will.
Thinking about what happens if you are unable to look after your own finances is equally difficult, but if you don’t make plans so that someone can pay bills and run your bank account if you’re no longer capable, it could cause problems for your family.
As the law stands, if you lose what’s called “mental capacity” (the ability to make your own decisions and understand the consequences), family members or friends would have to apply to a special court for permission to manage your finances.
The only exception would be if there’s already an ongoing power of attorney in place, or in regard to joint accounts, where whoever was named on the account has full access to it.
An ongoing power of attorney is a legal document that gives the person or people named as attorneys the right to make decisions on behalf of someone else.
In England and Wales it’s called a lasting power of attorney, in Scotland it’s a continuing power of attorney and in Northern Ireland it’s an enduring power of attorney.
There are two types: a financial and property power of attorney and a health and welfare one. I’m focusing on the financial power of attorney today.
You can only draw up an ongoing power of attorney while you have mental capacity. You can’t agree to someone else being able to manage your finances for you if you don’t understand what you’re agreeing to.
However, the power of attorney will only be activated once you lose the ability to manage your finances.
It may, of course, never be needed, but it’s wise to have it in place.
It’s best if you choose more than one attorney, in case one of them is ill, doesn’t want to be your attorney or is not able to act for you when the time comes. You can also nominate an attorney in reserve.
You can insist that the attorneys act jointly, which means that both have to agree to any money being spent or bills being paid. However, it’s not the most practical option.
Most people let their attorneys act “jointly and severally”, so that either one can make financial decisions for you. If you prefer, you can say that you’d like your attorneys to act “jointly and severally” for most things (paying day to day bills and so on), but that they have to act jointly on major financial decisions, such as selling your home.
Bear in mind that attorneys cannot make decisions that benefit themselves; so if, for example, you were to appoint your husband as your only attorney and you owned your home between you, selling the home would not be straightforward.
According to advice on Age UK’S website, the house would have to be put into a trust first.
You don’t need to use a solicitor to draw up an ongoing power of attorney, although you may prefer to use one. Solicitors charge between £150 to £400 or more (plus VAT) for this and there are registration fees on top.
If you want to do it yourself, you can submit the forms online or by post. It will cost you £77 to register a power of attorney in Scotland and £82 in England or Wales.
It is important that you appoint people in whom you have complete trust. However, don’t let worries about losing control of your finances put you off drawing one up.
The harsh reality is that if you are unable to manage your own financial affairs, someone else will have to do it for you.
If you have a power of attorney in place, you can choose who that is. If you don’t, it will be a court that decides for you. ■
Visit Sarah’s website at www.savvywoman.co.uk.