Power of Attorney Explained: Protecting Your Finances If You Lose Capacity

A Lasting Power of Attorney is arguably as important as a will, yet far fewer people arrange one - despite the fact that anyone can lose the mental capacity to manage their own affairs at any age, not only in old age, through an accident or sudden illness.

What a Lasting Power of Attorney actually is

A Lasting Power of Attorney (LPA) is a legal document letting you appoint one or more trusted people (your ‘attorneys’) to make decisions on your behalf if you’re unable to make them yourself. Crucially, an LPA must be set up while you still have mental capacity - it cannot be arranged retrospectively once someone has already lost capacity, at which point a different, more restrictive and costly court process (a Deputyship, via the Court of Protection) becomes necessary instead.

The two types of LPA

• Property and Financial Affairs LPA: covers decisions about money and property - paying bills, managing bank accounts, selling a home if necessary, and managing investments. This type can, with your permission, be used even while you still have capacity (for convenience), not only after you lose it.
• Health and Welfare LPA: covers decisions about medical treatment, care arrangements, and daily welfare - this type can only be used once you’ve lost capacity, not before.

Why ‘my spouse can just deal with it’ is a common and costly misconception

Many people assume a spouse or adult child can automatically step in and manage their finances if they lose capacity - this is not true in the UK. Even a spouse has no automatic legal right to access or manage your bank accounts or property on your behalf without an LPA (or a Deputyship, if no LPA exists) - banks and other institutions can, and do, refuse to act on a family member’s instructions without the correct legal authority in place. It’s a similar story with tax: many married couples assume the well-known ‘up to £1 million tax-free’ Inheritance Tax allowance applies automatically too, when in fact it depends on the right paperwork and both spouses’ allowances being correctly used (see our dedicated article on how married couples can pass on up to £1 million tax-free).

What happens without an LPA: the Court of Protection

If someone loses capacity without an LPA in place, a family member typically has to apply to the Court of Protection to be appointed as a ‘Deputy’ - a considerably longer, more expensive, and more restrictive process than having an LPA already registered. Deputies are also subject to ongoing court supervision and reporting requirements that attorneys under an LPA generally aren’t, making the whole process more burdensome for the family managing someone’s affairs.

Setting one up

• You can make an LPA online via gov.uk, or with a solicitor’s help for more complex situations.
• It must be registered with the Office of the Public Guardian before it can be used - this registration process itself can take some weeks, so it’s worth allowing time.
• You choose your own attorney(s), commonly a spouse, adult children, or a trusted friend, and can appoint more than one, specifying whether they must act jointly (together on every decision) or jointly and severally (able to act independently).
• A ‘certificate provider’ - an independent person confirming you understand what you’re signing and aren’t being pressured - must also sign the document.

Why setting this up well before it’s needed matters

Because an LPA can only be created while you have capacity, and capacity can be lost suddenly (a stroke, a serious accident, an unexpected diagnosis) rather than only gradually through age-related decline, waiting until it feels ‘necessary’ risks missing the window entirely. Financial advisers and solicitors commonly recommend setting up an LPA alongside a will, rather than treating it as a separate, lower-priority task for later in life.

The cost

The government registration fee is a flat amount per LPA (there are two separate documents - Property and Financial Affairs, and Health and Welfare - each requiring its own registration fee, though a reduction is available for certain low-income applicants), considerably less than the ongoing cost and complexity of a Court of Protection Deputyship application if no LPA exists when one is needed.

The bottom line

A Lasting Power of Attorney is a straightforward, relatively low-cost way to ensure someone you trust can manage your finances and welfare decisions if you’re ever unable to - and because it can only be set up while you have capacity, it’s worth arranging well before it feels urgently necessary, alongside making or updating your will.