Why should I have an LPA?

What Is Lasting Power of Attorney

A Lasting Power of Attorney (LPA) is “… a way of giving someone you trust the legal authority to make decisions on your behalf if you lack mental capacity at some time in the future or no longer wish to make decisions for yourself.” – Age UK. There are two types of LPA, one that covers financial decisions, and one that covers health and welfare decisions. To understand a little more about what an LPA is, please do read our article here.

However, even if you know what an LPA is, you may not be sure if you should bother setting one up just yet. If you’re thinking like that, here’s some food for thought.

  • An LPA is only valid if you had the mental capacity to set it up when it was set up – Once it reaches the point that your mental capacity cannot be verified, it is too late.
  • Mental and physical incapacity can hit at any time – This isn’t written to scare you, it’s just one of those things. Accident or illness can strike without warning. If you do not have either type of LPA in place, your family may struggle to gain access to your bank accounts, pay your bills, or make payments on your behalf for your mortgage, etc.
  • Delays and expense – Without an LPA relatives can face long delays and suffer considerable expense if they have to apply through the Court of Protection to get access and control of your assets and finances. This is likely to be the last thing they want to have to deal with when times are tough.
  • The LPA system makes things easier – LPAs are designed to be recognised by official bodies like care homes, HMRC, banks, local authorities, pension providers etc. Once an LPA has been verified, taking action on your behalf becomes much easier for your attorneys.
  • They are not expensive to set up – A small cost to you now will save your family a lot of money in the long term.
  • A financial LPA enables you to retain a lot of control over your affairs – You can, of course, give your chosen attorney(s) free reign, or you can restrict their decision making capacity by specifying your wishes clearly.
  • You don’t need to be incapacitated for a financial LPA to operate – This can be very useful. For example, if you’re on holiday and something happens to your home, your nominated person can take action on your behalf.
  • A health LPA enables you to retain a lot of control over your welfare – You can be very specific about your care, even on day to day matters. For example, you can set out what your day to day routine should be, what you should be given to eat, and who can visit you.
  • An LPA is a legal document that has to be verified – This will give you peace of mind. They have to be signed by a certificate provider or solicitor, which means they are ‘vetted’ by qualified specialists. Plus LPAs cannot be amended or set up by someone else. You are in control.
  • If you don’t have an LPA in place it is the court that decides for you – A court will follow a set procedure, which may limit the amount of power your relatives have. This can make life difficult for them.
  • A court may insist a solicitor is involved – This can make things very expensive.

For more guidance and information on setting up a lasting power of attorney, please do contact us. It’s worth making an informed decision now.

What is an Lasting Power of Attorney (LPA)?

Lasting-Power-Of-Attorney

When you hear talk about Wills, you often next hear talk about LPAs as well – Lasting Powers of Attorney. It’s not so much that they go hand in glove, it’s just that the rationale for having a Will actually points towards the need to have LPAs in place too. So we thought it would be a good idea to give you some information on these useful, and very important, legal documents to complement our article on why it’s important to have a Will (read here).

But what is an LPA?

“A lasting Power of Attorney (LPA) is a way of giving someone you trust the legal authority to make decisions on your behalf if you lack mental capacity at some time in the future or no longer wish to make decisions for yourself.” – Age UK

There are actually two types of LPA. Both fulfil different roles and are not interchangeable. They are:

  1. An LPA for financial decisions

This type of Lasting Power of Attorney can be used while you still have mental capacity. An attorney, a person to whom you give permission to make decisions on your behalf, can generally do so on things such as:

  • Buying and selling property
  • Paying the mortgage
  • Investing money
  • Paying bills
  • Arranging repairs to property
  1. An LPA for health and care decisions

A Lasting Power of Attorney for health and care decisions covers healthcare and personal welfare. It’s important to note that it can only be used once a person has lost mental capacity. A nominated attorney can generally make decisions about things such as:

  • Where you should live
  • What medical care you should receive
  • What you should eat
  • Who you should have contact with
  • What kind of social activities you should take part in

What can I specify in an LPA?

An LPA is a powerful document that enables you to retain control over your life. You can specify exactly what decisions your nominated attorney(s) can make. So you can allow them to make all decisions on your behalf, or restrict them to only certain types of decision. Thinking these things through carefully now, therefore, is worth doing before it’s too late.

One thing to bear in mind is that if you are setting up an LPA for financial decisions, the person you nominate must keep accounts. You can request regular reports on expenditure and income. And if you then lose mental capacity, you can specify that these reports are sent to your solicitor or a family member instead. They must also make sure their money is kept separate from your money. So check that this is possible with them in advance.

When is a lasting power of attorney valid?

IMPORTANT NOTE: An LPA is only valid if:

  • You had the mental capacity to set it up when it was set up
  • You were not put under any pressure to create it

To ensure this, the LPA has to be signed by a certificate provider. When a certificate provider signs the document, they are confirming that you understand what the LPA contains and that you haven’t been put under any pressure to sign it. They are typically someone you know well, but can also be a professional person, such as a doctor, social worker or solicitor.

Once these criteria have been met, the LPA must then be registered with the Office of the Public Guardian (OPG) before it can be used.

A final word…

As you can see, LPAs are important documents that facilitate critical decisions being made on your behalf if you’re no longer to do that for yourself. For more information on why you should have an LPA, please do read our article here or feel free to contact us to discuss your requirements.

Equity Release – Lifetime Mortgages

First things first… as we’ve said in our introduction to equity release (What is Equity Release), equity release is a type of financial product that enables eligible property owners to borrow money against the value stored in their home without having to move. Interest is added over time to the loan, such that the outstanding accumulated sum is then payable when the home owner dies or goes into long term care. This often means that the sum is paid off by selling the property.

An equity release lifetime mortgage is one type of equity release product that is available.

So, what is an Equity Release Lifetime Mortgage?

An equity release lifetime mortgage is, as the name suggests, a mortgage taken out against your home. In this instance, however, you can choose to either make repayments, or roll the interest up so that the loan plus the accrued interest accumulate and become payable when you die or go into long term care. So there is no fixed term, per se. You must, however, meet certain criteria to be eligible:

o   The property being mortgaged must be your main residence

o   You must own the property

It’s important, therefore, that you get financial advice from an independent financial adviser before you choose to take out a lifetime mortgage. All advisers who recommend equity release lifetime mortgages must have a specialist qualification. They will be able to advise you and help you decide whether an equity release lifetime mortgage is the right choice for you. And they will also be able to suggest which lifetime mortgage plan is most suited to your needs by researching all the products in the market.

What do I need to discuss with my adviser about a lifetime mortgage?

It’s worth bearing in mind that different mortgage lenders will operate differently with respect to both lending criteria and package details.  So it’s important that you discuss the differences with your adviser. The sort of information you may want to check is:

The minimum age

Usually lenders require you to be at least 55, but it may be older than that, so you need to check. Note that the younger you are when you start a lifetime mortgage policy, the more it is likely to cost in total.

Maximum percentage available to borrow

Often you can borrow up to 60% of the value of your property, but this can be dependent on your age and the value of your home. Some providers may take certain past or present medical conditions into consideration too, so it’s important that you discuss this with your adviser.

Whether you have to remain in the property

The mortgaged property must remain your main residence during the term of the mortgage. You can however move to another property, as long as that new property is acceptable to your lifetime mortgage provider. The threshold for what is acceptable as continuing security may vary between providers so it is important you discuss this with your adviser.

Repayment profile

Is the outstanding loan plus interest only to be paid in the event of your death? Or, are you able to make repayments towards the interest, for example, on a regular basis? If you can repay some on a regular basis, the mortgage will be less costly. However, you must consider how much you are agreeing to pay back regularly. An affordability check will be carried out by the provider.

How the equity can be released to you

Is it in one lump sum? Or does the provider allow for you to drawdown the sum in smaller chunks? It is worth remembering that you only pay interest on the loan amount that’s been released to you, so taking the sum in smaller amounts over time may be a less costly route to take. Your adviser will be able to discuss your requirements with you. Bear in mind there may be a minimum amount that each release payment can be.

Ring fenced percentage for inheritance purposes

It is possible to have a plan that enables you to ring fence a proportion of the value of the property. You should discuss what percentage you’d like to ring fence with your adviser and check that the retained percentage does not change, regardless of fluctuation in the value of the property.

What is the interest rate?

Interest rates must either be fixed or, if they are variable, capped by an upper limit which is fixed.

Negative equity guarantee

Does the provider guarantee that once the property has been sold and all agents and solicitors fees have been paid, even if the amount remaining is not enough to repay the full outstanding loan, neither you, nor your estate, will be liable for any more?

Additional important information about Equity Release Lifetime Mortgages

If you are over 55, want some extra cash, but don’t want to move house, equity release may be an option you want to consider. However, there are important considerations to bear in mind. Click here to find out more about these further considerations.

 

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

 

Equity Release Lifetime Mortgages – additional things you need to consider…

An equity release lifetime mortgage is a particular type of mortgage taken out against your home. For more details on what it actually is, click here.

Why do people take out an equity release lifetime mortgage?

Many people in their late 60s and 70s find that they are wealthy with respect to equity stored in the value of their home, but are cash light with respect to available cash that they can spend. An equity release plan provides buyers with ready cash.

This may sound an attractive proposition, but it’s important to be aware of certain considerations.

What should I consider when taking out an equity release lifetime mortgage?

Cost

An equity release lifetime mortgage can be more costly than an ordinary mortgage. This is for many reasons. For a start, the policy is not for a pre-defined length, so if you live longer than the term of an ordinary mortgage, a lot more interest will accrue. Plus, if you’re not paying any of the interest off whilst you’re alive, the accumulating sum of the original loan plus the interest can grow quite considerably. Also, the interest rate is often higher. This may be because the rate is fixed from the beginning of the contract, so your lender has to adjust their rate accordingly. They also need to factor in a ‘no negative equity’ guarantee. Both these factors can have an impact on the interest rate they can offer you.

All in all, this means the final sum due when you either die or go into long term care can be substantially more than the original sum of the loan. And you should be aware that this does mean that there may be less for you to pass on to your family as an inheritance.

Early repayment penalties

Early repayment penalties can be expensive, so it’s important you discuss this with your adviser. Please note, however, that they should not apply if you go into long term care.

Alternative uses for the equity

If you release equity from your home, you need to be aware that you may not be able to rely on the property for cash potentially needed later in retirement, e.g. For paying for long term care.

Moving property later

Although loans should be ‘portable’ in theory (ie. you are able to transfer them to a different main residence) your lender still needs to approve the new property before this is possible. If you are hoping to downsize, you may find you fall foul of their loan to property value ratio. I.e. If your lender has a policy not to lend more than 50% of the value of a property, and your proposed property would mean the percentage of the loan would increase above this, they may not accept the new property as security against the lifetime mortgage unless you can pay some of the outstanding loan off. Plus, some types of property, for example sheltered housing, are not always acceptable to lenders because they are difficult to sell in the future.

Loss of means-tested benefits

By releasing some of the equity in your property as cash, you may lose eligibility for certain government benefits such as pension and council tax benefits.

Arrangement fees

It’s important you check with your adviser what the arrangement fees are before committing to a particular plan.

How do I make sure I’m getting the right financial advice?

It’s important that you get financial advice from an independent financial adviser before you choose to take out a lifetime mortgage. All advisers who a recommend equity release lifetime mortgages must have a specialist qualification. But in addition to checking this, you should also check:

Advisers at Howard Financial Management Limited are qualified to provide advice on lifetime mortgages, so for more detailed information on lifetime mortgages please click here.

 

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

Equity Release – An Introduction

What is Equity Release?

Equity Release is a type of financial product that enables eligible and approved home owners, who are 55 or older, to borrow money against the value stored in their property without having to move home.

When an equity release loan is approved, an interest rate is agreed in advance. Interest is then added over time to the loan, such that the outstanding accumulated sum is then payable when the home owner dies or goes into long term care. This often means that the sum is paid off by selling the property.

It’s worth knowing that you can receive the approved sum in three ways:

  1. The full amount as a lump sum at the start of the agreement; or
  2. As a set of smaller amounts that are released over time; or
  3. Via a combination of these two methods. Ie. A proportion of the agreed amount as a lump sum at the start, followed by smaller amounts that are released over time.

How is Equity Released Offered?

There are two types of equity release loan: lifetime mortgages and home reversion plans.

  • Lifetime mortgages

A lifetime mortgage is a mortgage taken out against your property, provided:

o   It’s your main residence

o   You own the property

When a lifetime mortgage is approved, payment is made to you (the mortgagee) either as a lump sum or as a set of smaller payments, as per above. It is possible to have a plan that enables you to ring fence a proportion of the value of the property for inheritance purposes. And you can choose to either make repayments, or roll the interest up so that the loan plus the accrued interest accumulate and become payable when you die or go into long term care.

Advisers at Howard Financial Management Limited are qualified to provide advice on lifetime mortgages, so for more detailed information on lifetime mortgages please click here.

  • Home reversion

A home reversion plan works slightly differently to a lifetime mortgage. With a home reversion plan you sell part (or all) of your property to a home reversion provider. In return, you receive either a lump sum or an agreed set of regular payments. You are then able to live in the property rent free, as long as you:

o   Maintain the property

o   Insure the property

Again, it is possible to retain a percentage of the value of the property for inheritance purposes, and that retained percentage does not change, regardless of fluctuation in the value of the property. When the plan ends, the property is sold and the sale proceeds are shared out to the contracted parties as per their agreed percentage.

Advisers at Howard Financial Management Limited are not qualified to provide advice on home reversion plans or home reversion providers.

Additional important information about Equity Release Lifetime Mortgages

If you are over 55, want some extra cash, but don’t want to move house, equity release may be an option you want to consider. However, there are important aspects that you need to be aware of. Further details of these key considerations regarding equity release lifetime mortgages can be found by clicking here.

It’s important, therefore, that you get financial advice from an independent financial adviser before you make a decision. All advisers who recommend equity release lifetime mortgages must have a specialist qualification. They will be able to advise you and help you decide whether an equity release lifetime mortgage is the right choice for you. And they will also be able to suggest which lifetime mortgage plan is most suited to your needs by researching all the products in the market.

 

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.