I have a Will, why do I need a Power Of Attorney?
Making a Will allows the person instructing it (the ‘Testator’) to name individuals they wish to benefit from their estate and to stipulate any restrictions they see fit. Essentially, a Will allows the Testator to make their wishes known and protects the beneficiaries’ interests after the Testator has died, but a Power of Attorney (‘POA’) will protect their interests while they are alive.
A POA allows the person making the POA (the ‘Granter’) to appoint an Attorney to make decisions on their behalf, in the event that they cannot do so themselves. A Welfare POA allows the Attorney to make decisions on the healthcare and day to day welfare matters and a Continuing POA allows the Attorney to deal with financial matters. The Attorney is then entitled to look after the Granters affairs as the Granter would have done, had they been able. It is often incorrectly assumed that a next of kin will be able to take on this role; however the only legal means to manage the estate of an individual deemed incapax is with the aid of a POA or a Guardianship. It should be noted however that a Guardianship order is costly in both time and finances and further involves a Sherriff court order.
Although a POA is most commonly considered when retirement planning, there is in fact no specific age as to when a POA should be made. In fact, recent figures released by the Office of the Public Guardian (‘OPG’) indicate a growing trend towards younger individuals registering a POA. The number of under 65’s registering a POA increased in 2015 by almost 35%. When considering this statistic, it is important to clarify that welfare POA can only be used once capacity has been lost, whereas the Continuing POA can either be instated at the time of registration or when the Granter is no longer able to make their own decisions.
A Continuing Attorney is entitled to operate and manage bank accounts and investments – a clear benefit in both a personal and business capacity. In this sense, granting a POA could be compared to taking out an Insurance Policy, allowing the Granters affairs to be looked after by a trusted person in the event that they are not able to do so themselves, and therefore not limited to the elderly. A Continuing POA is not restricted to personal use and it provides the Granter with an opportunity to prepare for any unexpected situations that might have a negative impact on a business. Further, it is estimated that mental illnesses affect more than a third of the population of Scotland every year, forcing many to take time off work. There are numerous reasons why an individual may lose capacity and of course it may not be permanent, however the impact of not having anyone at the helm of a business for a number of weeks or months, could be disastrous.
Making a POA provides peace of mind and should form an essential part of every responsible adult’s future planning, for the very same reason that purchasing insurance and making a Will might be considered. Regardless of age and the assets held, POA safeguards assets while you are still alive and is equally, if not more important than a Will.