When conducting a client meeting or review it would be expected for a financial adviser to recommend, or even arrange if possible, a valid and up-to-date will to ensure that client’s wealth and wishes are dealt with on their death. However, how many advisers do the same for their clients with lasting powers of attorney (LPA) (known as continuing powers of attorney (CPA) in Scotland)? This is just as important. While having a will is a first consideration for estate planning, this only comes into effect on death, whereas LPAs can be needed while the client is alive, but is either unable to make their own decisions due to a loss of mental capacity or even just for delegation purposes. Whatever the client’s age, an LPA is an essential document to have as it enables trusted people to make decisions for a client. An ever aging population increases the risk that a client may lose mental capacity due to dementia for example, but a client of any age may suffer brain injury or physical incapacity as a result of an accident. In either circumstance, an LPA would prove invaluable as family would be able to deal with that person’s financial matters, health and welfare.
There are two types of LPA/CPA – one is for financial decisions (such as property and finances) and the other is for health and care decisions (personal welfare). A client would be best advised to have both as they cover different things and each may be needed at a later time by their family. The process to obtain either is the same, although it varies slightly in Scotland, and the arrangements must be registered with the Office of Public Guardian (OPG) so that they can then be used. A good reason for a client to have a financial decisions LPA in place is not only to deal with things like their bank accounts, but also their pension savings especially since the advent of pension freedoms. Clients now have greater choice for pension drawdown and without an LPA no-one could make these decisions either pre-retirement for investment strategy or at/post retirement for drawdown choices. A health and welfare LPA enables family to take important decisions on the care of their loved one.
The consequences of not having an LPA in place are very important to consider. Without a health and welfare LPA a family might find themselves in conflict with the local authority or NHS over their loved one’s care. If a client loses mental capacity to look after his or her own financial and personal welfare matters the only option is for someone of their behalf to apply for a deputyship order via the OPG at the Court of Protection – the process for which can be both lengthy and costly. Until this can be obtained no decisions can be made. Given the evident importance, financial advisers have a duty to discuss this with their clients. In doing so advisers can truly say they offer full holistic financial planning.
Ivan Millerton is training and business development manager at APS Legal Consulting.