As life spans increase, so also does the incidence of dementia, which makes it impossible for sufferers to look after their own personal and financial affairs.
Planning ahead for dementia
The recommended precaution is to execute a Lasting Power of Attorney (LPA), which enables nominated persons – usually family, friends or advisers – to take decisions regarding either money matters or healthcare matters in the event of the person who gives the Power becoming unable through illness or accident to conduct their own affairs.
In the absence of an LPA, a representative of the person who lacks capacity would have to apply to the Court of Protection to be appointed as its Deputy to take decisions on behalf of the person affected or to apply to the Court for permission to do so. However, this process is protracted and expensive, and it is far better to execute an LPA before the medical condition sets in.
The difficulty which arises is that in the interests of protecting the interests of the donor of the Power, the Attorney’s ability to act is strictly limited. There is no problem with the Attorney paying bills and other routine outgoings and even selling the donor’s home. However, the ability to undertake any financial or tax planning which might, for example, involve gifting assets to children or other family members, would be very severely curtailed.
Application could be made to the Court of Protection, but its concern will be to preserve the assets of the donor, in case they might be needed, rather than to assist arrangements which might save tax for family members.
Clearly it is important to consider executing an LPA rather than risk wanting to see if an application is needed.
If an LPA has been executed and the attorneys need to use it, they should seek legal and independent financial advice to ensure that they are fully aware of their role and their obligations. With proper advice, attorneys may find that whilst their ability to make gifts is limited, they can review and address any other financial issues.
How can Nelsons help?
For more advice on planning ahead for dementia or to comment on this article, please contact a member of our expert Wills, Trusts and Probate team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.