The rising costs and legal hurdles that leave us unable to protect ourselves
Who will manage your finances if you can't? Kate Hughes reports
Sunday 14 September 2008
Everyone hopes to have full control of their mental and physical faculties until the last possible moment, but often life doesn't play fair. Many of us will develop health problems as we get older, and some may even be struck down in the prime of life by accident or illness.
Having someone to take care of your finances would be essential in this eventuality, but it seems legislation designed to encourage people to protect themselves should the worst happen is actually deterring them from putting such safeguards in place.
A year after fundamental changes were introduced to the rules governing power of attorney in En-gland and Wales, the process has become long-winded and the costs involved have soared.
Using a power of attorney means you appoint someone while you are still in good health to deal with your financial and legal affairs if and when the time comes you not be able to do that for yourself. Most people envisage they might need such a representative only in extreme old age, forgetting that road accidents, for example, can happen at any time.
But the changes intended to improve the system are letting vulnerable people down, warns Julie Hutchison, head of estate planning for insurer Standard Life. "After a will, the power of attorney is the most important document you can have, but 75 per cent of people don't have one," she says.
Historically, the Enduring Power of Attorney (EPA), by which an individual officially appoints someone to look after their money in the event that they can't, has covered only financial matters. But last year the Lasting Power of Attorney was introduced to replace the EPA, allowing adults in England and Wales to nominate someone to look after their personal welfare as well as their money, including the right to make decisions about medical treatment if necessary.
"Concerns were raised over the way the power of attorney was controlled," says Ms Hutchison. "Calls to tighten up [the process] were answered with a huge increase in paperwork and solicitors' costs. The bureaucracy is out of all proportion: registrations take months to complete and the complexity, time and expense now serve as a huge disincentive."
In Scotland, similar but more successful legislation has been in place since 2001, and the number of people with the provision in place now stands at almost 130,000. This is impressive, given that the country has a population of just five million. "Lots of Scots have embraced power of attorney planning," adds Ms Hutchison, "and with registration fees of just £60, up from £35 earlier this year, it's easy to see why. But it seems that people in England and Wales are unlikely to be so keen because of the cost and time now involved in setting it up."
However, financial advisers urge people not to be put off thinking about their own long-term care plans or those of their close relatives. "This is a difficult subject to raise, particularly for adult children concerned for their parents, but it's a hugely important one," says Martin Bamford, director of the independent financial ad-viser Informed Choice.
He has the following advice for those thinking of setting up a power of attorney: "Try to bring down the cost by making the big decisions before you spend time with your solicitor. The most important ones are who you want to act as your attorney, and how broad you want their authority to be. They need to be a trustworthy person who is willing to take on that responsibility.
"You can have more than one person as your attorney but be confident that they can work together," he adds. "Relations can break down if people have different priorities, which can make an already difficult situation more strained."
Expertise and experience are crucial when it comes to making decisions about someone's long-term care. Your solicitor must have the appropriate specialist qualifications to be legally permitted to advise on care planning (this is not the case if you are simply making a will). The Society of Trust and Estate Practitioners (www.step.org) is the professional body for such experts, operating worldwide, and can help you find an appropriately qualified practitioner in your area.
For more information, go to publicguardian.gov.uk, or publicguardian-scotland.gov.uk
Handing over control: 10 steps to setting up a power of attorney
A Lasting Power of Attorney (LPA) is a legal document that allows someone (the attorney) to make decisions on behalf of another person (the donor) on matters such as healthcare and finance.
Anyone aged 18 or over can be a donor or an attorney.
One or more attorneys can be chosen.
The attorney must be trustworthy enough to make decisions about health and welfare.
The form is obtained at the Office of the Public Guardian's website and filled in by the donor and the attorney.
The donor chooses between two different forms. The first of these is a Personal Welfare LPA, allowing the attorney to make decisions about medical treatment, where the donor lives and day-to-day care. The second is a Property and Affairs LPA, allowing the attorney to manage finances and sell the donor's house.
A certificate provider must be selected for an LPA to be valid.
A certificate provider must be someone who has known the donor personally for at least two years, or someone with relevant professional skills and expertise.
To be valid, the LPA must also be registered with the Office of the Public Guardian.
The LPA registration fee is £150, plus any solicitors' fees.
Source: Office of the Public Guardian
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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