The rules around Lasting Powers of Attorney are changing, making it easier for you to help your clients register and so protect their wealth in the future. And with better protection comes more opportunity for advisers writes Vitality's Justin Taurog.
As an adviser you will spend a lot of time and consideration putting the best protection in place for your clients - whether that's life insurance, critical or serious illness cover, or a health policy.
But what happens if a degenerative condition, such as dementia or brain injury, means your client is no longer able to make decisions about their welfare or finances? The answer is a stressful and potentially costly delay in receiving the assistance they need.
A Lasting Power of Attorney (LPA) means that loved ones can make timely financial and welfare decisions on behalf of a client, rather than go through the court to apply for permission to manage their affairs.
The regulations around the creation and registration of LPAs are changing in July, when it will become simpler for a client (the ‘donor') to appoint the people they want to look after their affairs (their ‘attorneys').
With the change in rules comes an opportunity for you to educate your clients about the pitfalls of not having an LPA in place, and to show how you can protect their interests now and in the future.
|On the horizon
A recent review by the House of Lords Committee has found that there has been a low uptake of LPAs since their launch in October 2007, this has been attributed to their perceived complexity and a lack of understanding of powers. The Lasting Powers of Attorney, Enduring Powers of Attorney and Public Guardian (Amendment) Regulations 2015 will introduce a simplified process and redesigned forms. From July 2015 LPAs are to be made available in a simpler format which amalgamates the two separate forms and uses more accessible language.
Fast facts: how LPA rules are changing
The Lasting Powers of Attorney, Enduring Powers of Attorney and Public Guardian (Amendment) Regulations 2015 will come into force on 1 July 2015. This is what it means for you and your clients:
• Simplified creation and registration process.
• Current separate registration applications will be incorporated on to each form (Health & Welfare, and Property & Affairs).
• Old LPA forms can still be executed until 1 January 2016.
• Enduring Powers of Attorney executed before 1 October 2007 can still be used.
Putting your clients in control
There are numerous products available such as Serious Illness Cover and Critical Illness Cover that provide financial support if a holder becomes seriously ill. But that's just the start of effective protection.
And now with later life protection products on the market, and more expected to be introduced, an LPA becomes even more important.
If a client develops a degenerative disease such as dementia and they lose their mental capacity, without an LPA family and loved ones may not be unable to assist until someone is appointed as a court deputy by the Court of Protection.
Family or loved ones can apply to the court to be appointed as a deputy to make certain decisions on a client's behalf, as an attorney would, although these would be restricted to the powers specified by the court rather than by what a client chooses to specify in an LPA.
This can be a time consuming process, and one that is not controlled by the individual, which can be distressing for family and loved ones, particularly if there is a dispute as to who should be appointed as deputy.
At the point of claim, we need to ensure clients can access their cover as soon as possible. Having an LPA in place allows legally recognised attorneys to make a claim and manage affairs on behalf of the donor. An LPA is therefore key to any protection solutions you provide.
An LPA covers financial and property affairs, as well as health and welfare decisions. Without an LPA, all the necessary actions that need to be taken if a client is incapacitated are put on hold.
Crucial steps - from accessing bank accounts, to deciding their daily care routine or where they should live, and even who should run a business - cannot be taken. An LPA allows the family to take control while respecting the previously agreed wishes of their loved one.
LPAs for clients:
• plan what decisions they want taken on their behalf in the future
• decide who they want to make those decisions
• agree how they want the decisions to be made.
LPAs for advisers:
• avoid delays in accessing claims
• protect your clients' worth
• gain introductions to appointed attorneys
• talking point for business owners/entrepreneurs.
| What happens if a client suffers incapacity and doesn't have a Power of Attorney?
Property & Financial Affairs
• Will their bank account be accessible? X
• Will their joint accounts be accessible? X
• Will their business continue to operate? X
• Are pensions and investments accessible? X
• Can serious/critical illness/income protection claims be processed? Not always, depending on provider or cover
• Can sick pay be accessed? X
• Will household bills be met? X
Opportunities for advisers
The biggest advantage of LPAs is the security they can give to clients. However, there are also business opportunities for advisers.
Firstly, an LPA will help protect your client relationship by making it easier and quicker for them/their attorneys to make a claim on any policies you have put in place and access the support and finances they need.
Secondly, it can open up new business for advisers, as they consult with the appointed attorneys - they may also need life, health or illness protection, or their own LPAs.
Thirdly, you will be able to offer enhanced solutions for small business clients. Do the business owners you work with have an LPA in place? If not, who will manage the company if they are incapacitated? These are all valuable conversations to have with your clients.
By acting proactively now and pointing out the importance of an LPA - and the pitfalls of not having one - you will be able to offer a complete protection solution for your clients and the building blocks on which to develop your business.
Jane became incapacitated and didn't have LPAs
Jane did have Serious Illness Cover and the £150k claim was processed without the LPA, however her husband still was unable to manage the funds as they are paid into the policyholder's bank account. Her employee sick pay was also frozen in her bank account, meaning the monthly household bills could not be paid as her husband's salary alone was not enough.
Not only is there a financial impact to Jane and her family, as she had lost her mental capacity, decisions about her care were made by the Local Authority rather than her husband.
It doesn't just have an impact on the family, their adviser had to spend time trying to recover a damaged client relationship because they had not discussed LPA, putting other client revenue streams at risk.
Jane's husband applied for a deputyship order but the anticipated time delay is 12 months.
Justin Taurog is managing director of VitalityLife.
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