The financial effects of dementia and importance of Lasting Power of Attorney (LPA)


The financial effects of dementia and importance of Lasting Power of Attorney (LPA)Research for Alzheimer’s Society estimates that the number of people suffering from the illness will reach 1,142,677 by 2025 and 2,092,945 by 2050. However, despite the significant and concern about the financial impact of dementia, many people have failed to take any action toward lowering the risk.

Lasting Power of Attorney (LPA) gives a nominated person (or multiple people) the legal ability to make decisions on behalf of somebody who lacks the mental capacity to make those decisions independently.

The importance of acting early

Key Retirement research shows that:

  • 43% of people worry about how dementia could affect their finances
  • 47% are concerned that their partner will not be able to access their money if they need to

…but, only 12% of people have arranged LPA.

This may be due to mistaken beliefs that they will be able to make decisions and access accounts without LPA. The data shows that over-55s believe they are able to:

  • Make decisions regarding their spouse’s healthcare (36%)
  • Access their partner’s bank account (26%)
  • Discuss utility accounts which are in their spouse’s name (22%)
  • Speak to the pension providers on behalf of their partner (21%)
  • Speak to credit card providers on their spouse’s behalf (19%)

Without LPA or Deputyship, it is not possible to carry out any of these actions on behalf of a spouse or partner.

Types of LPA

Once appointed, there are many decisions which may fall under an Attorney’s remit. For this reason, there are two types of LPA:

  • Health and welfare LPA: This covers healthcare, living arrangements, care and personal needs and life-sustaining treatments
  • Property and financial affairs LPA: For finance and investment decisions including managing bank accounts, benefits and pensions, paying bills and selling property, if applicable

Attorneys are not limited to partners and spouses. In fact, anyone over the age of 18 can be chosen as an Attorney, whether they are a relative, friend or known in a professional capacity (such as a solicitor). You can also have more than one Attorney if desired.

Interestingly, just over half (54%) of over-55s say that they would trust their partner to manage their finances if needed, and only 28% would choose their son or daughter to make financial decisions on their behalf.

Applying to the Court of Protection

If a person is concerned about another person’s ability to make sound decisions, and that person has not appointed PLA, they may apply to the Court of protection for intervention. There are three decisions that they may ask of the court:

  • Emergency Court Order: in an urgent situation, an application can be made to the court which will allow decisions to be made on behalf of someone who is unable to do so themselves. This may be used after an accident, where medical decisions need to be made quickly and there is no Attorney
  • One-off: In the event of a disagreement which cannot be resolved outside of the court, it may be necessary to apply for a one-time decision regarding the finances or wellbeing of someone with reduced mental capacity
  • Deputyship: An application for Deputyship can be made when a loved one is suffering from a long-term illness or condition which will affect their mental capacity for the rest of their lives, and they have no LPA in place. This is a long process which, if successful, will give the Attorney the same responsibilities as they would have under LPA.

According to HM Revenue & Customs, over 14,000 Deputyship Order applications are made to the Court of Protection each year. Whilst a decision is usually made and communicated to the applicant within two weeks, the process can be drawn out and the court may request additional information or evidence which adds pressure to the situation. Conversely, an LPA agreement will mean that the vulnerable person can be looked after effectively much sooner.

39% of people say they have considered arranging LPA but have put off setting it up, which could delay their own care, should they need an Attorney to make decisions on their behalf.

Unfortunately, it is impossible to know whether you or a loved one will be affected by dementia in the future, or how quickly the effects will take hold. As the affected person must be of sound mind when the LPA is arranged, it is advisable to do so as early as possible.

A Lasting Power of Attorney arrangement is a fundamental part of sound estate planning, alongside creating a will and reducing the Inheritance Tax payable on death. Even if there are no signs that you or your partner will struggle mentally in the future, an LPA will ease the worries and “what if”s that so many people experience.