Lasting power of attorney (LPA) is a legal document that lets a person, known as the donor, appoint one or more people, known as attorneys, to help them make decisions or make decisions on their behalf. This can concern financial decisions which can be important for a person’s later years where they may succumb to certain debilitating conditions such as dementia.
LPAs are important for estate and financial planning but following a disruption to the process for applying for them during the pandemic, a “significant drop” was seen in the numbers registered over the last year or so.
Quilter, the financial advice and wealth management company, recently submitted a freedom of information request to the Ministry of Justice, which revealed there was a 30 percent drop in the number of LPAs registered between April 2020 and February 2021, compared to the same period the previous year.
These numbers have improved recently but they have still not recovered to their pre-pandemic levels.
Rachael Griffin, a tax and financial planning expert at Quilter, commented on this: “At the beginning of the pandemic everyone rushed to figure out how they could continue to offer services that previously required physical contact.
“Things such as getting a wet signature became problematic. In the instance of applications for Lasting Power of Attorney it took the Office of the Public Guardian (OPG) about a month to produce guidance on how to apply in the Covid-19 environment.
“On top of this, the OPG expressed they were seeing large levels of enquiries and it was taking longer than usual to process applications. It is no wonder we saw the year-on-year level of registrations drop by 70.5 percent for the month of April alone.
“While numbers still haven’t returned to their previous levels, they are getting closer and it is encouraging to see that people are getting the much-appreciated piece of mind that having an LPA entails.
“For those who were put off by the difficulty of registering an LPA at the beginning of lockdown, or haven’t had the chance to have what can be a difficult conversation, you must put the task back at the top of the to-do list. A LPA can only be registered while you have mental capacity – once you’ve lost capacity it’s too late.”
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Rachael concluded by examining what this means for inheritance tax planning: “Establishing a lasting power of attorney (LPA) is a critical part of later-life planning.
“There are two types of LPA, health and welfare; and property and financial affairs.
“A property and financial affairs LPA allows people you choose to help you with your finances if you lose mental capacity.
“They can make decisions about your property, investments, pensions, bank accounts, tax and bills. If you lose capacity before you have had time to put your estate in order. “For instance, you have not taken into account potential inheritance tax liabilities, then a LPA is crucial. Decisions can take time as some must be submitted to the Court of Protection to be allowed. So it is good practice to set up an LPA and have clear instructions as to how you want your estate handled.
“Without an LPA things get significantly more complicated and time consuming. Someone will need to apply to the Court of Protection who will decide if you have the mental capacity to make a decision and if necessary appoint a deputy to make decisions on your behalf. That person may or may not be the person you would have chosen.”
On top of these issues, it appears many are underestimating the importance of Will creation for inheritance tax purposes.
Recently, Tower Street Finance surveyed 2,000 UK adults and the results showed eight out of 10 people say that they plan to leave an inheritance to loved ones, but almost half are “leaving it to chance exactly who will, and will not, benefit”.
The results detailed 45 percent of UK adults say that they have not written a will, with 23 percent of people aged 55 and over and 47 percent of women not having one in place.
Despite this, people showed they have strong views on who should, and who should not, gain from any legacy they leave when they die, as 61 percent of people want their children to benefit from an inheritance, while a further 43 percent said they wanted to leave everything to their partner or spouse.
This should be noted as for those who wish to leave their estate to a partner, without a Will in place, only those who are married or in a civil partnership will have their last wishes fulfilled.
Under the rules of intestacy if a person dies without a will, only married or civil partners, and some close relatives such as children, siblings and grandparents, can inherit an estate.
Cohabiting couples, which according to the ONS are now the second fastest growing type of households in the UK, do not have any rights under intestacy.
Andrew Bartle, the founder and managing director of inheritance specialists Tower Street Finance, commented on this: “Writing a will is one of those things that we all know we need to do, but we put it off.
“No one likes to think about their death, but as our survey shows people have strong feelings about who should, and who should not, receive an inheritance so it’s important they make their last wishes clear in a will.”