The Guide Top Ten: Power of attorney is extra insurance

EACH week The Scotsman gives you a top ten guide to pertinent financial issues.

The recent case of two sisters who fought for the same inheritance tax rights as married couples and civil partners reinforced the need for financial planning to minimise the tax burden. This includes making a will, to set out the distribution of any assets after death, but using power of attorney to ensure that one's financial and other wishes continue are carried out in the event of serious physical or mental incapacity is less common – yet recent estimates show that, at any one time, this affects around 100,000 adults in Scotland.

Alison Riddell, of Edinburgh solicitors and asset managers Murray Beith Murray, offers ten tips on the benefits of granting a power of attorney.



1. INSURANCE
Look upon a power of attorney (POA) as a form of insurance – something that you hope you will never need but which is still reassuring to have in place. Anyone can suffer serious injuries from accidents or be suddenly and unexpectedly struck down by illness, such as a stroke or brain haemorrhage. Granting a POA will ensure that your wishes and needs – in particular your financial ones – will continue to be carried out in such an eventuality.



2. PLANNING AHEAD
Granting a POA is advisable for adults of all ages and is easy, quick and relatively inexpensive when there is no question as to one's mental capacity. Taking the necessary steps should be given high priority as you grow older, especially for anyone with a family history of ill-health.



3. SOMEONE YOU CAN TRUST?
Appoint someone you can trust to act in your best interests, whether it's family, a friend, or a professional adviser. A solicitor or medical practitioner must interview the person about to grant a power of attorney alone, to ascertain that the person understands what he or she is signing and is not doing so under forceful coercion, as they must sign a certificate to that effect before the deed can be registered with the Office of the Public Guardian.



4. SPREADING YOUR OPTIONS
Granting a POA in favour of more than one person is also advisable; the person appointed as attorney may be unable to carry out the duties charged to them under the POA if they themselves become incapacitated or predecease the granter. An attorney cannot appoint someone else – only the granter can, and it might be too late for that.



5. WHICH POA FOR YOU?
There are two main types of POA. One is a "continuing power of attorney", which gives another individual the authority to look after one's financial and business matters and which can take effect immediately the document is signed and registered, regardless of the mental capacity of the granter. The other, a "welfare power of attorney", deals with issues such as where the granter lives and personal care and takes effect only if the granter has lost his or her ability to make such decisions personally. It is especially helpful where there might be some disagreement over "what's best for mother". Both types of POA must be registered with the Office of the Public Guardian before they can take effect.



6. OTHER OPTIONS
A POA can also be granted in other circumstances. It is common, for example, for people travelling abroad for long periods, whether for work or leisure, to grant power of attorney to someone at home who can look after their affairs, particularly financial ones. This is more usually a non-continuing POA, in that it is not intended to continue to be effective if the granter loses mental capacity, and does not therefore have to be registered with the Office of the Public Guardian.

7. FINANCIAL MANAGEMENT
If mental or physical incapacity prevents you managing your own affairs, a POA will allow your attorney to step in immediately to pay bills from your own account and keep your personal or family budget running smoothly. This eases stress and the fear of being in debt.



8. TAX PLANNING
Your attorney can also take tax-planning steps on your behalf if the POA specifically permits it. This could involve ensuring, for example, that your annual allowances for inheritance tax are used, or enable the attorney to deal with your inheritance from someone else's estate.



9. IT MAKES SENSE
The typical legal fees for drawing up a POA are likely to be a few hundred pounds, depending on individual circumstances and the time expended, while the current fee for registration of a POA with the Public Guardian is £60. This should be compared with a situation when someone loses their mental capabilities, and there is no POA in place – the cumbersome procedure of going to court to obtain legal guardianship of the incapacitated person is likely to cost several thousand pounds in legal fees and other costs such as medical certificates.



10. YOU'RE IN CONTROL
Granting a POA does not remove your ability to act on your own behalf, but merely gives someone else your authority to help you as and when required. If you have the required capacity, the POA can be revoked at any time. Finally, a POA should not be confused with a will: if the person who has granted a POA dies, its terms immediately lapse and the attorney's authority ceases.