In just nine weeks time the current simple process for nominating someone to access and manage your finances -should you be incapable of doing so - will be withdrawn. On 1st October 2007, Enduring Powers of Attorney - a legal document that provides a nominated individual or individuals the authority to manage your affairs in such a scenario - will be replaced by Lasting Powers of Attorney. The new procedure will be more complicated and costly. Claire Johnson, Head of Wills and Estates and partner at leading south Wales law firm, Leo Abse and Cohen, explains there is still time left to deal with this important issue with relative ease before the October deadline.
"When an individual loses the mental capacity to manage his or her financial affairs - whether because of an accident, stroke or other illness - assets in the sole name of that person are effectively frozen until the Court of Protection can appoint a Receiver. The Receivership Application process can be drawn out and expensive.
"By taking the simple step of having an Enduring Power of Attorney (EPA) in place - a legal document that provides a nominated individual the authority to manage your finances - you can make a positive choice as to who you would trust to take on the role of managing your financial affairs if you are ever in the position of being unable to do so yourself. Subject to any restrictions you may wish to include, the person or persons you have nominated would then be able to manage any aspects of your finances, from administering your bank accounts and settling your bills to dealing with the sale and purchase of property.
"As with making a Will, all too often the importance of doing so only becomes completely clear when it is too late. Putting an EPA in place can be very straightforward and provide peace of mind for you and your family, but it is important that you act now before the 1st October 2007 deadline.
"From this date, under the new Mental Capacity Act, EPAs will be replaced by Lasting Powers of Attorney (LPA) and the process for putting these in place will be more time consuming, complicated and costly.
"Through an LPA, people can choose someone to manage not only their finances should they become incapable, but also their health and welfare decisions. Most people will still wish only to make a nomination in respect of their finances and for the power to be a 'peace of mind document' effectively lying dormant until needed. However, a key change to the mechanics of putting an LPA in place under the new rules means that this is likely to be more complex and therefore more expensive than setting up an EPA under the current system. In particular there will need to be a formal certificate confirming that the person giving the power has the necessary capacity to do so. Moreover, in practise it will be advisable to register the power with the Court of Protection as soon as it is made, whereas under the current system the Court of Protection need only be notified if and when the person who has given the power suffers a loss of mental capacity.
"With reports showing the number of people suffering from dementia is soaring and set to rise by 40% by 2025*, the importance of having appropriate arrangements in place has never been so topical. Although LPAs will replace EPAs in nine weeks time, EPAs made before this time will still be valid and continue to operate under the old system. Having a solicitor draw up a suitable EPA for you can cost as little as £80 and individuals are urged to take advantage of this before the new rules take effect and the costs are considerably higher."
Leo Abse & Cohen has offices in Cardiff, Newport and Swansea and offers legal advice to a broad range of private clients, companies and institutions.
*Figures sourced from the Alzheimer's Society