Research by insurer Royal London recently found that more than half of all UK adults don’t have a will in place. Of those, a quarter said that they had no intention of making one.
And what about a Lasting Power of Attorney (LPA)? While more than 800,000 LPAs were put in place in 2018 – a rise of 6% on the previous year – there are still millions of people in the UK who don’t have one.
A will or a Lasting Power of Attorney aren’t just for the elderly, unwell or parents. As you never know when the worst could happen or your life could change, it’s important to have both a will and an LPA and to keep them updated.
Below, we look at why it’s so important that you have both a will and a Lasting Power of Attorney in place.
What a will is for
- Appoints guardians to look after your minor children
- Outlines your executors – who will be in charge of administering your estate
- Gives guidance about your funeral wishes
- Divides up all your assets including personal possessions and cash which can be gifted to individuals, organisations and charities
- Provides guidance to the care of your pets
5 reasons you need a will
- A will makes it much easier for your family or friends to sort everything out when you die. If you don’t have a will the process is likely to be more time-consuming and stressful.
- You can ensure your money, property and possessions go to the right people. Without a will, there are rules which dictate how your assets should be allocated, and this may not be the way that you would have wished.
- You can ensure your assets pass to your partner if you are not married. Unmarried partners and partners who have not registered a civil partnership cannot inherit from each other unless there is a will.
- A will can help reduce the amount of Inheritance Tax that might be payable on the value of the property, assets and money you leave behind.
- If there is no will, dividing up an estate can lead to disputes and arguments among your family. A well-prepared will can help to avoid making your passing even more stressful for your survivors.
What happens if you die without making a will?
In the event that you die without making a will, your estate will be subject to the rules of intestacy. These rules allocate your estate in line with the order of family relationship, and this means your possessions and assets may not pass to the person you want them to. The order is:
- Spouse/civil partner – although if your estate is worth more than £250,000 then your children will also share in your estate. This can cause a problem for your surviving spouse/civil partner as it may mean they need to sell the family home in order to split the estate
Remember that none of the above includes step-relations, and that you must be married or in a civil partnership for your property to pass to your spouse/civil partner on your death without making a will.
If you die with no living close relatives, your whole estate will belong to the Crown or to the government. This law is called ‘bona vacantia’.
Why do I need a Lasting Power of Attorney?
Since the Lasting Power of Attorney (LPA) replaced the Enduring Power of Attorney in England and Wales in 2007, around three million have been implemented.
A Lasting Power of Attorney comes into effect if you lose mental capacity – either through illness or perhaps through an accident – or you no longer wish to make decisions for yourself. Using an LPA allows you to give someone you trust the legal authority to make decisions on your behalf.
With the Alzheimer’s Society saying that more than one million people in the UK will have dementia by 2025, ensuring an LPA is in place gives you the peace of mind that important decisions will be made by someone you trust.
There are two types of LPA:
- LPA for financial decisions – this is where your attorney deals with financial matters for you. They can look after your investments – for example, your pension in drawdown – and pay your bills. Your attorney must keep accounts and you can request regular details of how much is spent and how much money you have.
- LPA for health and care decisions – here, your attorney is empowered to make decisions relating to your health and care, such as where you live and what treatment you receive. This can only be used once you have lost mental capacity.
Setting up an LPA is straightforward. You can set up an LPA online through the Office of the Public Guardian, at a cost of £82 for each one in England and Wales and £77 in Scotland.
You can also set up your LPA through a solicitor. Having an LPA set up professionally will ensure that it is valid and will help to reduce the risk of any family disputes in the future.
Many people believe that LPAs are only for older people. However, the truth is that an LPA can cover either financial or healthcare decisions, and these can affect everyone. The loss of capacity can happen to you irrespective of your age, income or assets.
And, the earlier that you take out a LPA, the better. Most experts recommend that you take out an LPA as soon as possible, even though it may be years or even decades between the LPA being established and the attorneys needing to take over. This is because you can only take out an LPA if you have mental capacity.
Zurich say: “Once mental capacity is lost, it’s too late. Then the courts will be involved in deciding on deputies to manage the person’s affairs – this may not be who the person wanted it to be.”
I recently met a single client with no children who argued that he didn’t need a Lasting Power of Attorney as his sister would just deal with any issues. However, this may well not be the case. Without an LPA the case passes to the Court of Protection, meaning you can’t choose your own attorney and the process of appointing one can be lengthy and costly.
In this instance, even if my client’s sister were to be appointed as a deputy, it could take months to go through and cost hundreds of pounds. It’s still much better to have a Lasting Power of Attorney in place.
And, what if my client outlived his sister? If he is then unable to make important decisions in the future, and there’s no one who’s able to speak on his behalf, an independent mental capacity advocate (IMCA) must be instructed. Would he really want a government-appointed person making important decisions about his finances and healthcare?
If you would like to speak to a solicitor about making a will or setting up an LPA, please get in touch and we would be happy to refer you to someone who can help.