The fifth pillar of financial wellbeing
Back in September 2022, my colleague wrote about the five pillars of financial wellbeing[1]. Today’s article hones in on the fifth pillar which is ‘clarity and security for those we leave behind’, focusing on the need for wills and lasting powers of attorney.
Key takeaways
- Having a valid will ensures your wishes are followed. Without one, the laws of intestacy decide who inherits what, which can be complex and unintended.
- A will must be created while you’re of sound mind. If you wait too long, it can mean losing the chance to make your wishes legally binding.
- Lasting Powers of Attorney (LPAs) let trusted individuals make financial or medical decisions on your behalf if you lose capacity. Without them, loved ones may face costly and stressful legal delays.
- There are two types of LPA, Property and Financial Affairs and Health and Welfare. Having both helps cover decisions about your finances, health, and care if you lose capacity.
This is a particularly poignant piece for me because within the last year I have lost two aunts. As is often the case, it was unforeseen, but thankfully their pain was short lived. When I reflect on their respective last few weeks, I recognise that, if the following legal documents had been completed, then it may have been a little easier for them, and for us as a family. We all fall foul of pushing back life admin but I hope this article will provide a useful guide on the importance of clarity and security for those we leave behind.
Why is a valid will important?
Legacy planning means different things to different people. A will is the legal document which “lets you decide what happens to your money, property and possessions after your death”.[2]
If you die without a will, you are then deemed to have died ‘intestate’. It is then the laws of intestacy that decide how your legacy gets distributed. As you might expect, the rules are not simple. It will vary depending on where you live, relationship status and family, both immediate and extended.
How much do you need to retire and more…
How much income do you need to be comfortable, how much do you need invested and how to pay less tax…
If you are reading this and do not have a will, more information on intestacy can be found on the GOV.UK website.[3]
If that website makes for uncomfortable reading, I suggest prioritising getting a will completed as soon as possible.
One of my aunts was very specific about her legacy. Out of the blue, she was given just two weeks to live. Luckily, we were able to organise a legally binding will, but it took away time that she could have spent with family and friends. I say ‘luckily’ because being of sound mind is a key requirement when drafting a will [4], and many people who are suddenly given a short life expectancy may not be.
What is a lasting power of attorney?
A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf.[5]
There are two different types:
- Health and welfare
- Property and financial affairs
Both are equally important because they enable you to take control on who you trust to make those decisions.
If you lose mental capacity and these aren’t completed, then your loved ones might have to apply to the Court of Protection for permission to act on your behalf.[6] This can not only be time consuming, but also costly.
From a financial planning perspective, it could also be problematic. If all the finances are weighted in the sole name of the person who has lost capacity, the respective spouse or partner does not have a legal right to access the money. This can also come at a time when funds are needed quickly for ad hoc expenditure, or perhaps payment of bills, which will continue regardless of your situation. Hopefully, if you have partnered with a financial planner who is holistic in nature, they should have identified and planned to avoid such a scenario.
Lasting powers of attorney, once drafted, then need to be registered with the Office of the Public Guardian (OPG). Even if there are no mistakes or objection, it still takes up to 20 weeks to register.[7]
The health and welfare LPA enables your attorney to express your wishes when you are unable to in relation to your choices in areas such as life-sustaining medical treatment and general medical care. It only comes into effect once you have lost mental capacity.
My second aunt didn’t have LPAs in place. Thankfully, the NHS were brilliant and supported our requests in terms of end-of-life care; however, legally we did not have automatic authority.
Conclusion
Here at Saltus one of our values is ‘We Care’[8], which follows through into our approach when it comes to looking after your wealth and financial planning needs. Although these documents have no direct impact on growing your wealth, I would argue they play a vital role in providing peace of mind and should form part of any financial planning conversation.
For more information contact Alex Pugh, Saltus
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