Personal planning revolves around being prepared for the future and this has been brought into sharp focus in the current Covid climate. We insure our cars, homes, possessions and lives. We take great care in our financial planning by saving, funding pension plans, safeguarding our incomes and writing wills. But all of this cautious work could unravel if we don’t complete the process by setting up a PoA.
This allows those we trust to make everyday decisions on our behalf if we become mentally incapacitated and a sobering thought is that over one million of us in the UK will develop dementia by 2025, according to NHS statistics. There are two main types of PoA in Scotland: a Continuing Power of Attorney to take care of financial and property affairs and a Welfare Power of Attorney covering all aspects of health and wellbeing. Both need to be registered with the Office of the Public Guardian (Scotland).
The key warning here is that nobody has automatic authority to make decisions on your behalf and it’s vital that you don’t just assume the people you would want to handle your affairs, when you can’t, will be allowed to do so.
That final piece of the jigsaw, the PoA, is our ultimate insurance that what we have carefully planned for, will actually happen and it is too often ignored or viewed with suspicion in terms of losing control of our own affairs. But this is actually about exercising more control and ensuring our health and welfare plans are enacted. What could be personally more important?
Let’s consider the main alternative should there be no PoA in place and you lose physical and/or mental capacity. A guardianship order, arranged through the courts, can take several months to complete and is a costly and complex process. An individual can apply to be appointed as guardian, but the considerable hassle involved with this process can easily be circumvented simply by having a PoA in place.
Key to getting this right is to start meaningful dialogue with those you wish to appoint to look after your health and financial wellbeing. It is of great importance that whilst you are able to select those you trust most to represent you, you get on and do it. Anyone arranging a will for the first time, or simply reviewing it, should ensure a PoA is also put in place at that time.
It is crucial that you appoint the right people to act on your behalf and great care should be taken to select those you trust and who have the right skill set to represent your needs. Abuse of this position is very difficult to rectify and these appointments should be occasionally reviewed and changed if required. The obvious choices for your PoA are your children or family, but be sure that they can work together on your behalf if more than one Attorney is to be appointed. Family relationships can add a complicated dimension to any form of welfare planning and many also ask a professional adviser to act for them as well.
This is not something that just applies to those in later life and a PoA should be a serious consideration for younger generations. The planning landscape is littered with people who, for example, have been caught out by accidents or serious illness in early life. Husbands, wives and partners could well be left in a position of facing serious cash flow problems if they can’t access each other’s separate bank accounts. This also applies to sole traders and consultants whose partners could be blocked from accessing business accounts. Let’s also not forget authority to access social media, which is such an important part of many people’s lives.
So 2020 provided us with salutary lessons and exposed the fragility associated with many aspects of normal life. It should mean that 2021 is all about preparation.
Andrew Paterson is a Partner with Murray Beith Murray