When it comes to financial planning, we all have our own priorities that take centre stage. However, there are some parts of financial planning that everyone can benefit from; including writing a will and appointing a Lasting Power of Attorney.
Nobody wants to think about dying or ill health affecting their ability to make decisions, but they are circumstances that you need to think about.
60% of UK adults don’t have a will, according to research from Unbiased.co.uk, despite the important document dictating what will happen to your estate. It means that more than 31 million people are at risk of dying and having their estate distributed according to intestacy law, which may be vastly different from what your wishes are.
It seems that an won’t happen to me attitude means that UK adults are not writing a will. The top reason for not having a will was that it was a task they will undertake when they are older.
However, while those that fall into the 35-54 age category are more likely to have dependents and financial obligations, such as mortgages, just 28% have a will. With more on the line, it is important to have both a will and Lasting Power of Attorney in place.
Karen Barrett, CEO and Founder of Unbiased, said, “It looks as if people still aren’t getting the message. The huge benefits of having a will, and the even bigger risks of not having one, should be far more widely known and talked about. People think a will is just for the end of their life, and it is – but who knows when that will be?”
A Lasting Power of Attorney (LPA) allows you to appoint someone to make decisions on your behalf should you not be able to do so. For example, should ill-health mean you are no longer able to make financial decisions, your appointed attorney can make them for you. There are two different types of attorney, a property and financial affairs attorney and a health and welfare attorney; the same person can act as an attorney covering both areas.
You can give your attorney instructions within the LPA and they should make decisions based on your best interests.
Despite more people taking steps to name an LPA, which was introduced in 2007, the overall figure is still low. According to figures from Old Mutual Wealth, only two million people had registered an LPA at the end of 2016.
Appointing an LPA should be a step that is taken at the same time you are thinking about your will and overall financial plan.
When you are thinking about your wealth, you have probably considered what you would like to happen to it when you pass away. Maybe you want it shared between your children, or you may want to pass some on to your grandchildren, you may even decide you want to leave a portion of it to charity. However, without a will, your estate will be subject to intestacy laws, which may not align with your plans at all.
Intestacy laws rarely suit modern families, which can cause significant problems. For example, if you have children from a previous marriage they could end up with no inheritance at all, while step-children that you want to benefit from your wealth may also be excluded. As a result, it is important to ensure your wishes are known in a legal document.
In addition to distributing your wealth, writing a will has other benefits too. It can speed up the inheritance process and reduce the cost to your loved ones.
Karen Barrett added: “People tend not to think about wills, because they don’t like to think about death. But what 60% of Brits should think about is the headache and expense they will cause their families if they die intestate. At best, it will be inconvenient; at worst, it could trigger bitter disputes and lead to some loved ones missing out entirely. Yet it’s so easy to prevent this from happening; a quick consultation with a solicitor is all it may take.
“Your will is your last chance to make your mark on the world. Whether giving sentimental items to family and friends, or leaving charitable gifts, your final wishes help to shape how people will remember you. No-one should miss out on this chance to leave a proper legacy.”
Lasting Power of Attorney (LPA)
Most people have considered a will at some point, but an LPA should be viewed as just as important.
LPAs has been available for over a decade now, replacing the former Enduring Power of Attorney. They essentially appoint someone or a group of people to look after your personal, financial, and business affairs should you have an accident or an illness that means you are no longer able to make your own decisions.
It is not a prospect anyone wants to think about but it is one that you should consider in the context of your wider financial and life plans. The attorney you appoint may have the power to make a variety of decisions that will affect you, such as whether you move into a care home, managing your bank accounts, or selling your property.
Even if you are married, your partner does not have an automatic right to manage your finances; even if your money is held in a joint account. As a result, an up-to-date LPA should be something everyone has in place.
With that in mind, what happens if you become ill but don’t have a Lasting Power of Attorney in place?
It is a lengthy process that will need to go through the Court of Protection and your loved ones may need to appoint a solicitor. Assuming no objections are made, you can expect the process to take around six months. It will not only be stressful for your loved ones but, depending on your condition, may leave you in an uncomfortable position too.
According to the estimates of one solicitor, the cost of setting up Financial LPA is £864. In contrast, an attorney appointed by the Court of Protection will leave you or your loved ones with a bill of £5,525 over the course of five years.
If you want to review your will or Lasting Power of Attorney, or if you don’t have either of these important considerations in place at all, we can provide the guidance needed to ensure they are aligned with your wider financial goals.
Please note: The Financial Conduct Authority (FCA) does not regulate estate and inheritance tax planning.