Do You Need a Lasting Power of Attorney?

Older borrowers, or those carrying their mortgage forward after the age of 65, are advised to have a Lasting Power of Attorney (LPA) in place. Indeed, we recommend that everyone, whatever their age, should have an LPA.

An LPA is a means of giving legal authority to someone trustworthy to help you make decisions or to make decisions on your behalf. This offers more control over what happens to you in the future, should you be unable to make your own decisions or you no longer want to make decisions yourself.

The growing trend towards mortgage borrowing among older people increases the likelihood of some borrowers being unable to manage some, or all, of their financial affairs at some point during their retirement, because of physical ill-health or a lack of mental capacity.

According to the NHS, the risk of Alzheimer’s disease and getting other types of dementia increases with age, affecting an estimated one in 14 people over the age of 65 and one in every six people over the age of 80. A recent report by Alzheimer's Research UK says that one in three people born this year could end up suffering dementia.

Building societies relax rules on older borrowers

The Building Societies Association recently reported that more than half its members will now lend to borrowers up to or beyond the age of 80.

In the context of mortgage borrowing, an LPA will cover the managing of repayments and the means by which appointed third parties make those repayments. Without an LPA, the account paying the mortgage may be frozen, which could lead to defaulting on a mortgage.

People who opt for an income drawdown scheme to fund retirement are also advised to set up an LPA. Income drawdown allows individuals to take sums out of a pension pot while the rest remains invested, although it involves risk and requires ongoing management to maximise returns and avoid spending saved funds too quickly.

In the context of drawdown, an LPA could cover anything from managing investments to the need for an income to be redirected in order to pay for care requirements.

How to register an LPA

There are two types of LPA: one is for health and welfare decisions and the other is for property and financial affairs.

Both types of LPA needs to be registered before they can be used whether or not the donor has capacity. A health and welfare LPA cannot be used unless you lack capacity to make these types of decisions.

Registering an LPA involves sending a form to the Office of the Public Guardian along with a fee of £110.

The Government’s guide to making and registering an LPA is here.

It is important to plan in advance as there is a waiting time for the document to be registered. This usually takes around twelve weeks, but varies depending on the number of applications being processed at the same time as yours.

Wealthy families are reversing the 'Bank of Mum and Dad'

A new lending trend sees middle-aged children paying the mortgages taken out by their elderly parents.

An increasing number of families see it is a highly efficient way of allowing wealth to pass down a generation, and it can also help cut inheritance tax liabilities.

The trend is being driven by new, cheaper mortgage deals targeted at older borrowers and where the interest can be paid each month. This model is a departure from traditional “equity release” or “lifetime mortgages” where interest is not paid monthly but instead accrues for the life of the loan.

Monthly interest payments help avoid the compounding effect of the debt. In many instances, these payments are being made by children or grandchildren, whose wages can more comfortably cover the outgoings.

Wills, Trusts and Probate

Contact IBB's experienced wills and trusts solicitors today to discuss the creation of a Lasting Power of Attorney or other matter. Call us today on 03456 381381 or email estatemanagement@ibblaw.co.uk. Alternatively please click here for more information.