Life is unpredictable, and you unfortunately can never truly know if things might suddenly go south. From a financial perspective, such a sudden shock can be detrimental, and it is important to have measures in place to be able to deal with such circumstances. A will, or sufficient savings is a vital first step, but in addition to that, a Lasting Power of attorney (POA) is also an important consideration. This article will briefly examine power of attorney, explaining what it is, and why you should set it up.

What is it?

A POA is a legal document that allows for a person (agent) to act on another person’s behalf (principal) if the principal is no longer able to look after their affairs themselves. It gives the agent authority over any legal, financial, property or healthcare decisions for the principal. This is especially critical later in life, since many people find themselves constrained in their abilities to make these decisions, normally due to healthcare concerns or incapacitation. The agent can be any person, but should be someone trustworthy, for instance a relative, spouse or trusted friend.

What types are there?

  • Financial and Property Power of Attorney: This type of POA gives the agent authority over any financial affairs in relation to the principal. This can include anything from bills, taxes, and social care costs to managing bank accounts, investments, and pensions. The agent is required to do this to the best of their ability and the scope can be further defined within the agreement which can be further subcategorised in to a General POA and Limited POA, which determine the extent of the agent’s powers. The former gives the agent authority in all matters, while the latter limits the agent’s abilities based on a POA agreement.
  • Health and Welfare: The other form of power of attorney gives your agent control over your healthcare and well-being. They will be able to manage your social care costs, medical care, and care home costs. This makes dealing with complex medical issues, if you no longer able to do it yourself, smoother and easier to handle.

Why it is important?

Setting up a POA now, means that if something happens, you have securities in place to deal with your finances. The reason this is so important is because a POA can only be set up while the principal is still of sound mind. If the principal becomes incapacitated, a POA can no longer be set up, and the only other solution is a deputyship. This is a much more arduous process which can take months and be very expensive. A deputyship needs to be renewed on an annual basis and an annual fee is required, plus any financial actions need to be justified in detail, whereas this isn’t necessary with a POA. A POA allows for much more peace of mind when regulating your finances and incurs significantly less stress and expenses for the agent.

Conclusion

A Power of Attorney is an important safety net to put in place to manage your financial wellbeing in case you find yourself unable to do so yourself. It can be set up by anyone over the age of 18, and is a beneficial consideration for anyone, as you can never be fully sure what life will throw at you. It will help you consolidate some financial stability, allow for precautions in later life, and remove a significant stress for your loved ones, in the unthinkable case that something unfortunate happens.

Talk to one of our expert financial advisors today, to discuss your pension planning and achieving your ideal retirement outlook.

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