Dementia UK advises that there are currently 900,000 people living with dementia in the UK, with the numbers set to rise to over a million by 2025. Clients are often concerned about the steps they should take following a diagnosis of dementia for themselves or their spouse: in particular managing legal affairs for someone with dementia. In these situations, there are two important things to consider.
What are Powers of Attorney?
Apart from Powers of Attorney being an important part of ordinary estate planning, if someone is likely to lose their ability to deal with their financial, or personal care decisions, it is vital to get a Lasting Power of Attorney (LPA) in place. An LPA is a legal document that allows you (the donor) to appoint one or more individuals (the attorneys) to manage your affairs when you can no longer do so yourself. There are two types of LPA, one for property and finances, which covers all financial decisions including managing bank accounts, investments and pensions; or even selling your home. The health and welfare LPA meanwhile covers not only medical decisions, including the ability to make life sustaining treatment decisions if you so choose, but also personal care decisions, such as where you might live and what you might do on a day-to-day basis after you lose mental capacity. You do not have to appoint the same people for each LPA, and you also have the option for appointing primary and replacement attorneys to give flexibility.
LPAs are very important, as if you lose your mental capacity without a financial power of attorney, banks can freeze your accounts. An application would then need to be made to the Court of Protection for a deputyship order, which is a costly and time-consuming process, and may not result in the person you wanted appointed to manage your affairs.
Some clients have already put in place Enduring Powers of Attorney (EPA). EPAs were the predecessor for LPAs, and while you cannot make a new EPA, any that were validly made remain useable. However, if you have an EPA and can no longer deal with your affairs, your attorneys need to register the document with the Office of the Public Guardian, the body that deals with powers of attorney. There is a set registration process which must be correctly followed, which we can assist with. However, EPAs only cover property and financial decisions, so it is still important to get an LPA for health and welfare in place.
You can only make an LPA when you have mental capacity to do so, which is a set legal test. If you or a loved one has been diagnosed with the early stages dementia it is important to act quickly to have the documents signed while the donor still has the mental capacity to do so. The documents do need to be registered with the Office Public Guardian before they can be utilised and therefore, having regard to the Court’s time frame of 6 months – 8 months in completing the registration process, it is important to start the LPA instructions sooner rather than later.
Diagnosed with dementia – Review your Wills
It is important for everyone to have a Will in place. However, if your spouse has been diagnosed with dementia, it may be prudent to review your Will. Many married couples have simple Wills, leaving the whole estate to one another. The problem is that a spouse with dementia may require expensive care. If you predeceased your spouse and left the full estate to them, all your assets could be eaten up with care fees. In a worst-case scenario, this could result in no assets being available for your children.
While one solution is to leave assets directly to children or grandchildren, this can be unappealing as it could leave the surviving spouse vulnerable to third parties. For example, if one of the children became bankrupt, then the spouse could end up against the trustee in bankruptcy. Depending on the value of your estate, it could also result in an immediate charge to inheritance tax on your death. An alternative is to protect assets using a trust structure from which your spouse can benefit during their lifetime. This is called a life-interest trust and allows your spouse to remain in the property and to receive the income from estate assets while protecting the underlying capital for the benefit for your children. The advantage of this structure is that there should not be any inheritance tax charge on first death for married couples and civil partners.
How Moore Barlow can help
With experience successfully helping a variety of clients, our team of private wealth lawyers will help find the best solution for you. If you would like to discuss LPAs, registering EPAs or a life-interest trust Will, contact the Private wealth team onvand we will be happy to assist.