Wednesday 27th September, 2017
The power of attorney dilemma: Pros and cons of putting someone else in charge
Putting someone else in the driving seat of your financial or medical decisions can be a daunting decision. As our capacity to deal with forms, telephone calls and visits to the high street reduces, our reliance on others increases, but when is the right time to hand over power? Here’s what you need to know about power of attorney.
What is power of attorney?
The power of attorney is essentially your permission for another person to act on your behalf in serious situations where normally only you would be able to deal with the issue. It takes the form of a legal document, which you put together and sign, giving that individual the rights to attend to certain matters on your behalf.
A power of attorney doesn’t have to be a permanent decision. Sometimes it can be helpful to have someone dealing with a particular situation for you, but for other issues you’d rather stay in control. For example, if you were in hospital and needed a friend or relative to pay your bills for you, you could grant temporary power of attorney to them to ensure these things are done.
Alternatively, you can grant a more permanent power of attorney. This enables a friend or relative to act on your behalf for the rest of your life, and can be a great decision if you are diagnosed with a degenerative disease such as dementia.
Types of power of attorney
There are three main types of power of attorney, each of which may be useful to you in different situations.
Ordinary power of attorney: This allows one or more people, who will be known as your attorney, to make financial decisions for you. This type of agreement is only valid while you have mental capacity to make your own decisions, so it is best for people who are temporarily in hospital, can no longer get to the bank or post office, or physically struggle to complete necessary paperwork.
Lasting power of attorney: Lasting power of attorney gives someone you trust the right to make decisions on your behalf if you are unable to make those decisions yourself. This can be for financial reasons, such as selling your home, investing savings or paying bills. It can also be for care and health purposes, such as what medical care you receive, where you live and how you spend your time.
Enduring power of attorney: Today, there is no longer such a thing as an enduring power of attorney, as these were replaced with lasting power of attorney in October 2007. However, if you signed an enduring power of attorney agreement prior to this date, it will still be valid. Enduring power of attorney only covers financials, so if you want your attorney to deal with healthcare decisions too, it can be a good idea to set up a lasting power of attorney to work alongside your existing enduring power of attorney.
Understanding the types of power of attorney available to you is the first step towards deciding if it’s right for you to put this agreement in place.
Pros and cons of power of attorney
There is no hard and fast rule about when you should implement a power of attorney agreement. It’s very much an individual decision, and one you should consider carefully. There are a lot of advantages to setting up a power of attorney agreement, including:
• It’s inexpensive
• You’ll feel more certain of the future
• You can still retain ultimate control if you wish
• You get to choose who is your attorney
It’s also worth weighing up the disadvantages too. A power of attorney will only end upon your death, so it’s a decision you’ll have to live with for the rest of your life. Think about things like:
• Whether the person you choose is competent
• Whether they are trustworthy and willing to help
• If all your financial institutions are going to recognise the power of attorney
• What you will do if something goes wrong
For most situations, appointing a power of attorney is nothing to be afraid of. In fact, the process can be liberating. It’s easy to assume that if our mental capacity fails us our affairs will be handled by our wife or husband, son or daughter, but in actual fact, without a power of attorney drawn up, they may well not be. Consider your options, and do your homework on the pros and cons of power of attorney, because it could be the best decision you ever made.
Don’t forget, you can contact us for more information and our team can point you in the direction of independent financial advisors.