Protecting what matters: Your guide to wills and Powers of Attorney

Key Takeaways

• A Lasting Power of Attorney (LPA) ensures that someone you trust can manage your affairs if you lose mental capacity and without one, your family may face a costly and lengthy Court of Protection application.
• A will is the only way to ensure that your assets are distributed according to your wishes, as the intestacy rules may not reflect what you would have wanted.
• Even if you already have a will, it is essential to review it regularly, particularly after major life events such as marriage, divorce, or the birth of children or grandchildren.
• Planning ahead with both LPAs and wills is not about preparing for the worst; it is about taking control of your future and protecting your loved ones.

What are Lasting Powers of Attorney and why do you need one?

A Lasting Power of Attorney, commonly referred to as an LPA, is a legal document that allows you to appoint one or more trusted individuals to make decisions on your behalf should you ever become unable to make them yourself. The people you appoint are known as your "attorneys" and can be family members, friends or anyone else in whom you place your trust.

There are several common misconceptions about LPAs that are worth addressing at the outset. First, many people believe that a spouse can automatically deal with their finances if they lose capacity. This is not the case. Without an LPA, even a spouse may be unable to manage assets held in the other's sole name. Second, an LPA is not the same as a will. A will only takes effect after death, whereas an LPA is designed for use during your lifetime. Third, there is a widespread assumption that LPAs are only necessary for older people. In reality, incapacity can result from accidents or sudden illness at any age. It is never too early to put an LPA in place.

The two types of LPA explained

There are two types of LPA and it is generally advisable to consider putting both in place.

The first is a Property and Financial Affairs LPA, which covers decisions relating to your money, property, bills, bank accounts, investments and the sale or purchase of your home. This type of LPA can be used as soon as it is registered with the Office of the Public Guardian(provided you consent to its use) and it continues to have effect if you later lose mental capacity.

The second is a Health and Welfare LPA, which covers decisions about your medical treatment, where you live, your day-to-day care and life-sustaining treatment. Unlike a Property and Financial Affairs LPA, a Health and Welfare LPA can only be used once you have lost the capacity to make decisions for yourself.

What happens if you do not have an LPA in place?

Many people assume that their spouse, partner, or children will automatically be able to step in and manage their affairs if they lose capacity. Unfortunately, this is not the case. Without an LPA, your loved ones may face significant difficulties.

If no LPA is in place, your family may need to apply to the Court of Protection, which is the court responsible for making decisions on behalf of people who lack mental capacity. The application process is lengthy, expensive, and stressful. It can take many months and during that time your family may be unable to access your bank accounts, sell your property or make important decisions about your care. The court fees alone are substantial and ongoing legal costs can be considerable. Furthermore, the court will decide who manages your affairs and it may not be the person you would have chosen.

By making an LPA while you are well, you retain full control over who will act for you. You can select people you trust, set out specific instructions and preferences and ensure that your wishes are respected. It is important to emphasise that making an LPA does not mean handing over control immediately. You choose who your attorneys are and you can revoke the LPA at any time while you still have capacity. It is about planning ahead, not giving up autonomy.

A Property and Financial Affairs LPA can also be helpful in everyday situations. Even while you retain full capacity, it can be used if you are in hospital, travelling or simply prefer someone else to handle certain financial tasks on your behalf.

Choosing the right attorneys for your LPA

Your attorneys must be people you trust completely, as they will hold significant power over your affairs. Many people choose to appoint their spouse, children, or close and trusted friends. You may also appoint a professional, such as a solicitor, if you prefer.

There are certain legal requirements to bear in mind. Your attorneys must be over the age of 18 and must have mental capacity themselves. For a Property and Financial Affairs LPA, your attorney cannot be someone who is bankrupt. It is also worth considering the appointment of replacement attorneys, who can step in if one of your original attorneys is unable or unwilling to act.

How to set up an LPA

The process for setting up an LPA involves several key steps. Once you have decided on your attorneys, you will need to complete the LPA form and ensure that it is signed in the correct order, in accordance with the specific requirements set by the Office of the Public Guardian.

You will also need a certificate provider, whose role is to confirm that you understand what you are doing and that you have the capacity to make the LPA. A certificate provider can be a solicitor or someone who has known you personally for more than two years, although they cannot be one of your appointed attorneys.

Once the LPA has been signed, it must be sent to the Office of the Public Guardian for registration. This process currently takes approximately three months.

Why every adult needs a will

A will is a legal document that sets out what you want to happen to your assets after you die, including your property, savings, possessions and investments. It allows you to appoint executors, who are the people responsible for administering your estate. If you have children under the age of 18, it also allows you to appoint guardians to look after them.

Having a will is one of the most important things you can do for your family. It ensures that your wishes are followed, it can help to minimise the inheritance tax payable on your estate and it can prevent unnecessary stress, confusion and conflict among your loved ones at what is already an incredibly difficult time. Despite this, research suggests that over 56% of adults in the United Kingdom do not have a will in place, including 53% of those aged between 50 and 64.

What happens if you die without a will?

If you die without a valid will, you are said to have died "intestate" and your estate will be distributed according to the rules of intestacy, which are set out in legislation. These rules are rigid and may not reflect your wishes.

If you are married or in a civil partnership and have children, your spouse or civil partner will receive all of your personal chattels (that is, your personal belongings), the first £322,000 of your estate and half of the remainder. The other half of the remainder is divided equally among your children. This may not accord with your wishes, nor is it necessarily the most tax-efficient way for your estate to be dealt with, as it may give rise to an immediate inheritance tax charge that could have been avoided with proper planning.

If your estate is worth less than £322,000, your spouse or civil partner will inherit everything and your children will receive nothing from the estate.

If you are not married or in a civil partnership, the intestacy rules follow an order of priority. If you have children, your entire estate passes to them in equal shares. If you have no children, it passes to your parents, then to your siblings, and so on down a prescribed list of relatives. If no qualifying relatives can be found, your entire estate passes to the Crown.  If you wish to make gifts to charity in the event of your death then you will need to ensure that you specify this in your will.  

It is particularly important to note that if you are living with a partner but are not married or in a civil partnership, your partner has no automatic right to inherit anything under the intestacy rules, regardless of how long you have been together or whether you have children together. The concept of a "common law spouse" or "common law marriage" does not exist in law, which is a very common misconception. Without a will, your partner may be left with nothing or may have to make a claim against your estate through the courts, which is both costly and uncertain.

In addition to dictating how your estate is distributed, the intestacy rules also determine who administers your estate. This is decided in a prescribed order of priority and may not be the person you would have chosen as your executor.

When should you review and update your will?

Even if you already have a will in place, it is important to ensure that it remains up to date and reflects your current wishes. Many people put wills in place when their children are small or when they first marry, but then neglect to review them as their circumstances change.

If you have married since making your will, it will have been automatically revoked. In any event, it is good practice to review your will at least every five years, or following major life events such as marriage, divorce, retirement, the birth of children or grandchildren or the death of a beneficiary. It is equally important to ensure that your will is correctly structured to be as tax-efficient as possible.

How a will can protect your family

One of the key advantages of having a will is the ability to put in place controls and protections that reflect your particular family circumstances.

A will allows you to determine not only who benefits from your estate, but also how they benefit. For example, you may wish to specify the age at which your children or grandchildren are to receive their inheritance. Many people feel that giving a young person a large sum of money too early could cloud their judgement in making life choices A will allows you to defer their entitlement until a more appropriate age.

You may also wish to ensure that your children benefit even after the death of your spouse. This is particularly relevant where there are second or third marriages, or children from previous relationships, but it can apply in any family. If your husband or wife were to remarry after your death and start a new family or inherit stepchildren, you may want to protect your own children's inheritance rather than risk it passing to others.

There are further scenarios to consider. A surviving spouse who inherits a large sum of money may be vulnerable to unscrupulous individuals. Similarly, if your children are going through a divorce or experiencing business difficulties at the time of your death, any funds they inherit could pass to their creditors or to a former spouse. While these are not pleasant matters to contemplate, it is only by considering these possibilities that you can identify what truly matters to you and how far you wish to go to protect your family's interests.

Taking the next steps: LPAs and wills

Both LPAs and wills are relatively straightforward to put in place with the assistance of a solicitor and the cost is modest when compared with the potential consequences of not having them.

If you do not already have LPAs in place, it is advisable to consider making them sooner rather than later. You must have mental capacity at the time you make an LPA, so this is not something that can be left until a crisis arises. If you do not have a will, or if your will is more than a few years old and your circumstances have changed, it is important to have it reviewed and updated. A will that no longer reflects your circumstances can be almost as problematic as having no will at all.

It is also worth talking to your family about these matters. While it may feel awkward, knowing where important documents are kept, understanding your wishes and being prepared for the unexpected can make an enormous difference when the time comes.  You can explain why and how you have divided your estate among your loved ones whilst you are alive, but you cannot do so when you are gone.  

Few of us can control the circumstances or timing of our death, but we can ensure that our affairs are in order; proper estate planning is one of the most considerate things you can do for those you leave behind.