You Should Know What a Will and a Lasting Power of Attorney (LPA) are
Planning about the future and when you lose mental capacity can be quite daunting, and a lot of people would rather not do it. Even if it is an unnerving thought to not do anything and hope that nothing bad will happen, the situation would be unpleasant. Your health is going to be most likely high in your priorities, so it is important to plan for it now. In addition, lasting power of attorney (LPA) is just as helpful to you as a will is even if they are different.
What is a Will?
It is a document made legal to set forth the wishes you have when it comes to your property and the care of your minor children. To widen the possibility of your wishes being carried out, you would want to write a will signed by you and your witnesses. In case your will is unable to meet the necessary standards, there is a chance for your instructions to not be executed.
Not all wills are able to meet the standards, and there are different kinds of it.
Some Reasons Why You Need a Will
- You can decide on how your estate’s distribution will be. A will allows you to determine what will happen to your estate once you die. If you do not have a will when you die, it cannot be guaranteed that your desires are going to be executed. Having one is going to help minimize family feuds that may happen because of your estate. In addition, it determines everything about where your estate will go.
- It is essential if other people depend on you. Writing your will is critical if there are children or family member(s) who are financially dependent on you. It’s also crucial if you wish to leave something to those who are not part of your immediate family.
- It will avoid a lengthy probate process. In contrast to what people commonly believe, all estates should go through probate and tells the court how you want your estate to be divided. The purpose of probate courts is to “administer your estate”, so dying without a will means the court is going to decide for you. This can be a very long process that causes delays.
- Reduce inheritance tax – A will helps reduce the inheritance tax that needs to be paid based on your property’s value and the amount of money you left.
- You can disinherit individuals. The majority of people have no realization about disinheriting individuals when they write a will. Yes, you are allowed to disinherit individuals who might inherit anything from you in case you have no will. Since wills are very specific in outlining the distribution of your will, not having a will might put your estate in the wrong hands. It could even be someone you did not want to give a part of your estate to. An example of this would be an ex-spouse whom you are not on good terms with.
What a Will Does Not Cover?
Even if wills are generally for addressing most of your assets, there are a couple of items that are not part of the instructions. These are:
- community property
- the proceeds from payouts in the life insurance policy
- retirement assets
- investment accounts designated as “transfer to death.”
- joined tenants owned assets
Commonly Inherited Assets
Part of Probate
- The investment accounts or retirement accounts which do not have beneficiaries or any transfer on death (TOD) instructions.
- Cash and cash accounts cannot have a TOD designation.
- Valuable items and personal property.
- Real estate.
- Assets owned as part of tenants in common.
Not Normally Part of Probate
- Retirement accounts with mentioned beneficiaries.
- Proceeds of the insurance policy.
- Brokerage, investment or cash accounts that have TOD instructions.
- Joint membership assets with the right of survivorship.
A Will Can be Changed
It is easy to change your will because you have to execute a new one or add anything by using a codicil. Ideally, you might want to include changes while you are still healthy and mentally capable. This is going to limit the chances of your wishes being successfully challenged that also prevents decisions finalized under heavy emotional pressure or in haste.
Lasting Power of Attorney
When the time comes that you are no longer able to decide for yourself, someone would have to do it for you. In general, estate planning professionals are going to decide on your social care and health. Your family or caregivers will handle day-to-day concerns.
If you want to, someone can be officially appointed to decide for you. It is known as a Lasting Power of Attorney, which lets you give someone else the authority to decide on your care. You also have the freedom to appoint a lawyer to make decisions on your property and financial matters.
Legal Responsibilities of the Person You Appointed
- He or she must act in your best interests, as well as taking a lot of care when they make decisions for you.
- Follow the terms of the LPA.
- Helping you to make decisions when it is possible instead of taking full control.
What Happens if You Do Not Have an LPA?
If you did not execute an LPA and you can no longer make decisions on your own, your family may go to the court. This costs more complicated, and time-consuming compared to have an LPA set up.
Why You Need a Lasting Power of Attorney
- If you are no longer able to say what you want, someone can do it for you. Without an LPA, no one will be legal to decide on your health, welfare, and finances. This means that in case you suffer from an illness or accident, no one can automatically take charge of any matters. It cannot even be your parent, spouse, or child.
- Peace of mind – You probably do not want to pass away without anyone handling your property, savings or cash. What if you do not die and lose your mental capacity instead? It’s not comfortable to think about it but it’s important to consider making this decision while you are healthy. An LPA is most likely the only way to ensure that your interests are well-protected when you become incapacitated until you die. The will can distribute your estate according to your wishes only when you are dead.
- It becomes effective right away when needed. Once you have an LPA, your worries will be gone because you know it will become effective as soon as it is necessary. Without an LPA, your loved ones might not know right away what should be done and where to go.
- Protection – The Court of Protection revoked LPAs and can be the ones to authorize if they are valid or not. Furthermore, they can contact the Office of the Public Guardian in case attorneys are suspected of abuse, or if they are not acting in the individual’s best interest.
- The right LPA can be chosen based on circumstances. There are two kinds of LPA: for health and welfare and to cover your financial and property affairs.
Types of LPA
The Health and Welfare LPA allows the Donee (appointed person) to decide on medical treatments, the healthcare you will receive and living arrangements. This becomes effective when you lack the mental capacity to decide for yourself.
The Property and Welfare LPA authorizes the Donee to handle your property, finances, and assets you own. Without this, the banks and financial institutions are not going to discuss any financial affairs you have with anyone else. You must at least have a Deputyship Order when that happens. You can choose when this will become effective. This could happen when your mental capacity declines to decide on your own, or when you are still able to manage your affairs.
- Limited financial powers – Your Donee cannot just handle every penny you own and give it away. There is a cap on financial gifts, and there needs to be a court order to approve a larger amount given to other people. Moreover, financial advice should be sought before the Donee can make decisions about investments for you. This is going to protect you from them making wild speculations about your money.
Canceling an LPA
An LPA can be canceled anytime as long as you still good health and a sound mind to do it. You might want to do this if you have to because your circumstances can change anytime. For instance, if your mental capacity declines, or you no longer need or want a specific person to decide for you.
In order to have an LPA canceled, you should make a Deed of Revocation. Send the document to the Office of the Public Guardian but attach the original LPA.
An LPA can be automatically canceled if, for instance, your Donee loses their mental capacity or dies.
It is Important to Have a Will and an LPA
It is one way to make sure that you and your loved ones do not encounter any inconveniences when you die or become mentally incapacitated. If you have a will but no LPA, your family might be powerless to care for you in case anything happens to you.
A Donee Appointed in Your LPA vs. Executor of Your Will
Donee can make decisions on your health and welfare and finances when you are not able to anymore. An executor you appointed is the one who is going to carry out Will’s provisions only after you die. Therefore, a Donee can only act until your death. Meanwhile, the executor can only operate from when you die and onwards.
LPAs Still Allow You to Make Decisions Before the Donee Steps In
The Donee should make sure they made all possible efforts to let you decide on your own before deciding on your behalf. Therefore, the donee should be satisfied with every financial decision since it is impossible for you to make.
Wills Do Not Allow the Executor to Ask You About Decisions
Since you are no longer alive, obviously the executor cannot ask you how you want to proceed. Therefore, the executor should act based on the provisions of your will and perform their duties. The responsibilities of an executor are:
- To collect and safeguard your estate assets.
- Pay your liabilities and debts.
- To distribute your estate to beneficiaries according to your will. These roles are separate and they never overlap. Different documents can appoint them and it can be one or not the same person(s). Therefore, it might be beneficial to review the position you are in. This makes sure that the people who will be taking the appointed roles are the ones you really want.
The LPA becomes effective right away according to what is in the document. Someone can make decisions for you already. A will is effective only when you die. When this happens, the appointee will only carry out the decisions you made according to your will. It is important to have both because it authorizes a person(s) to do something for you while you are still alive and when you die. A lasting power of attorney (LPA) and a will are equally important.