Who'll care for your money if you can't care for yourself?
Kathleen Hennessy explains how to appoint a financial guardian should you need one to act for you
Sunday 23 September 2007
The prospect of mental incapacity through illness, accident or old age is depressing, but potentially just as worrying is having no say in who manages your financial affairs once you can no longer do so.
However, there is something you can do about it – provided you act while still mentally capable. An enduring power of attorney (EPA) is a legal document that lets you appoint someone, the attorney, to take control of your finances. He or she can then write cheques on your behalf, withdraw cash from accounts and even sell your property.
To protect the person making the arrangement, the donor, various provisos can be written into an EPA: you can appoint more than one attorney, for example, and insist they act jointly; you can choose a date when the power will come into effect; and you can specify which areas are controlled by the attorney. So you could allow him or her to use your cash but not to sell your home.
However, EPAs are being ditched on 1 October in favour of a new arrangement called lasting power of attorney (LPA).
"Some years ago the Law Commission felt the existing system was open to abuse," explains Mark Keenan, partner at solicitors Mishcon de Reya.
The problem is that responsibility for registering an EPA lies with the attorney, not the donor. On registration with the Court of Protection, attorneys can be required to file accounts of their dealings with the donor's finances. But an unscrupulous attorney could simply not bother to register the EPA, and begin raiding the donor's assets.
An LPA, by contrast, must be registered from the outset and must be certified by someone who can testify that the donor understands the arrangement. The certifier must also explain all this to the donor without anyone else, who might otherwise exert an influence, being present.
But there is a sting in the tail: LPAs will cost more. "An EPA is straightforward: there is one page of notes to explain the form you have to complete, and you only need details of the donor, the attorney and any restrictions," says Mr Keenan. "But an LPA is 24 pages long, with a 57-page guide. It follows that it will take longer to set up because it's more complex. And, as legal professionals are often paid by the hour, this means an LPA will be more costly."
Overall, it is estimated that drawing up an LPA could cost more than £350.
There are ways to minimise costs, however. Many home insurance policies provide cover for legal costs as standard, but insurer More Th>* also offers an add-on service for around £18 a year that deals with setting up an EPA/LPA.
"The system basically runs through the same questions a solicitor would ask about an EPA/LPA," says Simon Logan at More Th>*. "Once completed, the forms can be emailed to our panel of solicitors, who will email back with any queries or discrepancies."
A cheaper option still, where possible, is to set up an EPA before 1 October.
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