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Common misconceptions about Lasting Powers of Attorney

People often believe that if they were to lose mental capacity their next of kin would simply be able to manage their finances on their behalf.  Unfortunately, ‘next of kin’ is not a legally recognised term and the reality is that your spouse or children would not automatically be granted access to assets in your sole name, such as your bank accounts.  This demonstrates the importance of having a Lasting Power of Attorney (LPA) for financial decisions in place for this eventuality.

Even if someone has an LPA, there can be misconceptions about what your attorney can or can’t do on your behalf.  We explore a few of these below:

  • There is a misconception that if you make a power of attorney, you are immediately giving away control of your assets to someone else. This is not the case.  Providing you still have mental capacity to make financial decisions, you should continue to do so and even if your attorney is assisting you, they should consult you before acting.  LPAs are similar to insurance policies; you may never need to rely on them but if you do, they are worth their weight in gold.
  • If you have an investment fund which is run by an investment manager, you may assume that on loss of capacity, your attorney can simply continue with this arrangement. This is not always the case and may depend on the particular financial institution. In some circumstances, your existing contract relating to discretionary investment management may end if you lose capacity and a new contract with your attorneys may only be permitted if there is an express instruction allowing this in your LPA.
  • Many attorneys mistakenly believe that they can make unlimited gifts of any size from your assets, with the justification that ‘I know it’s what they would have wanted’. Whilst the attorney steps into your shoes in relation to the majority of financial decisions, there are specific rules around when gifts can be made and in what sum.
  • An area that often causes confusion, is the relationship between an LPA and a Will. Often clients will think that because they have one or the other, their affairs are in order and the devolution of their estate is certain.  It is important to make the distinction between LPAs for management of your estate during lifetime and a Will for administration of your estate on death.
  • A final misconception, and concern for many clients, is that after you lose capacity, your attorney will be able to change your Will. Again, whilst the attorney steps into your shoes regarding the majority of financial decisions, this is not one of them and whilst an attorney will be entitled to view a copy of your Will (unless your LPA contains a contrary indication),   in order to alter it, they would need to make an application to the Court of Protection for a statutory Will. A statutory Will is only approved in limited circumstances –  if it is thought to be in the testator’s best interests, and more likely if they have never made a Will before or there has been a  significant change in circumstances.

To ensure that your LPA is fit for purpose and contains the relevant freedoms and restrictions to operate in a way that meets your wishes for your estate if you become unable to make decisions for yourself, we recommend seeking professional legal advice.


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