5 essential reasons why you should have a Power of Attorney in place

Planning for your financial future normally focuses on two eventualities – death and retirement. You’ll most likely have plans in place to deal with the monetary impact of both of these.

But there’s a third potential event that seems to be a lesser priority when it comes to making financial arrangements, and that’s you being incapacitated and unable to make financial decisions for yourself.

Setting up a Power of Attorney (POA) gives you the ability to nominate someone you trust to act on your behalf if you’re unable to.

According to Which? only 15% of people have any kind of POA in place. That figure is even more startling when you consider that the same Which? research revealed that 85% knew about POA and how they worked.

To be fair, the conditions that would necessitate aa POA being required aren’t pleasant to think about. The idea of not having the mental or physical capacity to act for yourself is not easy to face up to.

But the impact of not having a POA could cause no end of stress and emotional trauma for your loved ones, at the very time when they’ll need reassurance and stability.

It’s more than about old age

As you’ve read, thinking about the circumstances around a POA being required isn’t easy. Quite often it’s associated with old age, and dementia specifically.

It’s for this reason that you may well have been tempted to put off setting one up – either in the short or long term.

But accidents and illnesses can strike at any age. For example, a US study in 2020 showed that up to 15% of strokes affect people under the age of 50. And a serious accident could happen to you at any age. All these events could leave you unable to manage your own affairs.

Likewise, in the event of a short-term illness, your POA can ensure everything is managed for you rather than hoping your affairs proceed as normal.

Being unable to make decisions for even just a month or so can have a lasting impact, so why take the chance?

There are three types of POA in Scotland

When you’re considering making legal arrangements for someone to manage your affairs if you’re unable to, there are three types of POA to consider if you live in Scotland:

1. Continuing Power of Attorney

This enables your appointed attorney, to look after your property and financial affairs. You have the option to deem that this comes into force immediately so someone can help you to manage your money now, or only comes into effect if you subsequently lose the capacity to make your own decisions.

2. Welfare Power of Attorney

This enables your attorney to make decisions about your health and welfare if you are unable to do this yourself. Such decisions could include where you will live and the type of medical care you will receive.

3. Combined Continuing and Welfare Power of Attorney

This combines the first two POA options outlined above. Your attorney will look after both your financial affairs and health and welfare decisions.

It’s important to note that the laws regarding POA are different in England. If you need help with Power of Attorney arrangements and are resident in England, we’d strongly recommend you get expert advice.

Your family could face costs and delays without a POA in place

Without an applicable POA in place, an application would need to be made to the courts for a Guardianship Order so that someone can act on your behalf.

They will then decide if you’re able to make your own decisions. If they decide you lack the mental capacity to do so, they will appoint someone to make decisions on your behalf.

The process can be costly and lengthy, delaying decisions that may be important. It’s a process that can be stressful for both you and your loved ones.

5 important reasons to have a Power of Attorney

To summarise what you’ve read, here are five important reasons why you should set up a POA:

1. It can assist you in managing serious “what-if?” scenarios that you may have thought of but not wanted to face up to.

2. Without a POA, no one – not even your spouse or partner – has the automatic right to make decisions on your behalf. A POA provides valuable peace of mind for both you, and your family.

3. A Welfare Power of Attorney means that, if you’re incapacitated, you’ll have the comfort that someone you know, and trust, will be making medical decisions for you.

4. Whatever the circumstances, you know your interests will be looked after by someone you trust.

5. A Continuing Power of Attorney provides reassurance and security, so someone can maintain continuity when it comes to issues around your finances such as income and debt payments.

A POA should form part of your wider estate planning process

When it comes to estate planning, you should be looking to get your financial affairs in order. Doing this means that, when you die, you know the value of your assets will be distributed in accordance with your wishes. Careful planning can also ensure that as little as possible is paid to HMRC in Inheritance Tax.

Making a will should form part of this process, and so should setting up an appropriate POA.

Get in touch

If you have any queries regarding your Lasting Power of Attorney requirements, or need some guidance, then please get in touch.

You can email me at graeme@macfp.co.uk or call me on 01349 832849.