Money – How do you make sure that you are not caught out?
I was recently asked by a Social Enterprise project to deliver a talk on lasting powers of attorneys (LPAs) and the legalities of dealing with money both when someone is alive and also upon their death as there had been an incident in their community that had brought the matter to the fore. As I love raising awareness of how we can legally protect ourselves and set in place what we want to happen, I was very grateful for the invitation. I therefore would like to share the following guidance.
Handling money whilst you are alive:
Whilst you have mental capacity i.e. you can make decision easily as you are fit and can understand matters, you can handle your own affairs easily. If, however, your health starts to fail, you have a period of recovery or you lose your capacity, handling your affairs becomes difficult.
If you have set up a LPA so that your attorneys can act for you whilst you do still have capacity, you are able to instruct them to handle your affairs for you and legally they will be able to do so without you needing to sort out authorisations and being present. This means that if you have periods where you are in hospital, are in recovery or are just getting less able, you do not need to worry about handling things on your own or having to give your authority for every transaction to go ahead. Without the LPA, you would struggle to ‘function’ financially.
Indeed, if you lose capacity, handling your affairs becomes impossible unless you have appointed at least one attorney to act for you by drawing up a Property & Finance LPA. All of your accounts are frozen and no-one, not even a partner, will be able to make decisions and access them for you. This includes joint assets/accounts and therefore any dependants also become financially ‘stuck’. Your partner/family/friends cannot access your accounts/assets and make decisions as even if they somehow manage to access your accounts, as maybe they know your PIN or passwords, they risk getting arrested for criminal matters!
If you have created a LPA your attorney(s) can access your finances and make decisions for you, acting in your best interests at all times. If you have set out instructions and preferences in the LPA, the attorneys will need to act accordingly, and they must at all times make thorough records of their decisions and keep separate accounts showing how the money has been handled. This ensures the smooth running of your affairs and you also have people you trust and who know you well making decisions for you.
If you have not created a LPA and you lose capacity, it is too late to appoint attorneys under a LPA. A loved one, or an independent third party, will have to apply to the Court of Protection to become your Deputy. This process is expensive and time consuming (can take up to 6 months), as well as more onerous and restrictive as a Deputy can only act in such a way as set out by the Court, and there are ongoing costs that must be paid to the Court. There is no guarantee that an appointed Deputy will be someone who knows you. Your wishes will therefore not be known and how they proceed may well not be as you would want.
Handling your money when you are dead:
Your assets and accounts are effectively ‘shut down’. Your next of kin/executor should notify everyone of your death and enclose a copy of your death certificate proving the same. If your next of kin/loved one accesses your accounts after your death they risk being arrested and potentially charged with criminal offences.
How matters proceed on your death depends on the amount of money/assets left (your estate) and whether you have made a will. If your next of kin needs access to your money to pay for funeral costs, they may be able to obtain this money from your bank account subject to the requirements set out by each bank, and the actual estate value. Generally if your estate is under £10,000.00 your next of kin may be able to access your accounts subject to terms.