What is a Lasting Power of Attorney?

The idea of being unable to make financial decisions for yourself is one that can seem improbable, or even daunting. However, it’s something that each of us must consider for our finances, as this scenario could impact you in your lifetime.

In these instances, it’s essential you understand how a Lasting Power of Attorney (LPA) can be necessary.

This article will take you through what an LPA is, why it’s crucial for your finances, and how you can set one up.

An LPA should be considered as part of a broader financial plan, and a modern wealth manager such as Netwealth financial planning can help you to be suitably prepared for various financial outcomes.

What is a lasting power of attorney?

An LPA is a legal document that allows you to appoint a certain person, or persons, to make decisions on your behalf. This is used in cases where you aren’t able to make these decisions through a ‘lack of mental capacity’.

There are two main types of LPA:

• A Health and Welfare LPA – This covers any important decisions relating to your health and care, which can include where you’re going to live, your daily routine, as well as decisions surrounding life-sustaining treatment. An LPA can only be used if you’re incapable of making these decisions yourself.
• A Property and Financial Affairs LPA – This LPA document covers any decisions involving your finances and property. It can include the ability for others to pay your bills, handle your property, buy and sell and control your investments, and manage your accounts. You can adjust the LPA so only certain, or all aspects of your finances and property are included – e.g., your property, but not your bank accounts.

You can also use an LPA for a temporary situation, such as if you are in hospital and unable to distribute your finances accordingly – bills, bank accounts, etc. If necessary, your LPA can be a longer-term solution if you feel your capacity to make these decisions will be permanently affected in the future.

Why is a Lasting Power of Attorney important?

Having an LPA is a crucial component in your finances, as circumstances that can impact your mental capacity could occur at any time.

There are multiple ways you could lose your capability to make vital financial decisions, such as a diagnosis of Alzheimer’s, a stroke, a brain injury, an accident, and many other unfortunate scenarios. For instance, if you or someone you know has experienced a traumatic brain injury and is seeking financial compensation, it’s advisable to consult with trusted brain injury attorneys.

In these cases, your financial obligations still require effective management, if not more than ever. For example, if you require medical treatment, you need to have the right management in place to ensure your wealth is distributed appropriately to cover your medical bills, as well as continual upkeep of your property, and various other assets.

Without an LPA, there are complex – and often expensive – processes for any loved ones to access your finances. They must complete an application for the Court of Protection to appoint a deputy to handle everyday financial matters.

Therefore, having an LPA in place is the best option to protect your finances and build wealth resilience for any unexpected impacts.

How can you set up a lasting power of attorney?

Setting up an LPA is a fairly simple process. It requires you to apply for your chosen legal document with the Office of the Public Guardian, and register who you want to act on your behalf for your finances and/or health.

As with many financial decisions, a modern wealth manager can advise you on the best approach for your LPA. They will ensure you not only have the right steps in place, should it become necessary, but also that you’ve established the right financial plan for your wealth if you need to protect your wishes.

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