By Harriet Meyer
Harriet Meyer is a multi-award-winning personal finance journalist who regularly writes for titles including The Guardian, The Telegraph and Daily Mail. Harriet learned a lot about helping vulnerable parents manage their money through her own experience with her father. In this article she shares useful tips on simplifying money matters as you or a relative gets older and explains how instruments like lasting power of attorney and third-party mandates can allow people with elderly or vulnerable relatives to help them manage their finances more easily as they become less able to manage their money themselves.
Onboarding with a new bank should be a moment of progress and partnership for a charity. However, banks have to follow strict processes and occasionally find that charities aren’t prepared for the amount of information and detail the bank needs in order to set up a new account and get the new relationship off to a great start.
When a family member is struggling to manage their finances, you can step in. Here’s what you can do to help and what you need to watch out for.
Perhaps your parents may have forgotten their online banking password, or you discover bills piling up in your siblings’ hallway. It can be tricky knowing when to step in, but there are plenty of ways you can help them manage their finances, without taking over completely.
Besides, if they have dementia or another serious illness, it’s important to know they’ll often need extra help later on, even if things seem manageable now. Over time, someone with dementia is likely to be unable to make choices about their money, care, or wellbeing.
Here’s what you can do to help them with their finances.
Setting up a lasting power of attorney
Your relative or loved one might just need a hand with everyday financial tasks like paying bills or sorting online banking. But as time goes on, you may find yourself having to take full control of their finances. That’s where a lasting power of attorney (LPA) comes in. An LPA gives you the legal right to make decisions for them when they are no longer able to do so, whether it’s managing their money or making choices about their care.
There are two types of LPA:
- Property and financial affairs LPA: This allows you to manage your relatives or loved one’s bank accounts, bills and, for example, sell their home on their behalf.
- Health and welfare LPA: This gives you authority to make decisions about your relatives or loved one’s medical treatment, healthcare and end-of-life care.
An LPA needs to be registered with the Office of the Public Guardian to be valid. Leave it too late and if your parent loses mental capacity, you’ll have to go through the Court of Protection to get control. This can be a long, stressful and expensive process.
In Scotland, it’s called Power of Attorney (not ‘Lasting’), and in Northern Ireland, the equivalent is an Enduring Power of Attorney. Different names, and a slightly different process, but the same idea.
Caroline Abrahams, Charity Director at Age UK, said: “At Age UK we always encourage older people and those closest to them to think seriously about making a Lasting Power of Attorney (LPA), well in advance of any suggestion that it may be required.
“If you are married or in a civil partnership you may think that your partner would automatically be able to deal with your bank account and pensions, and make decisions about your healthcare, if you lose the ability to do so. This is not the case. Without an LPA, they won’t have the authority.”
The pros and cons of a lasting power of attorney
Pros
A lasting power of attorney (LPA) gives you the legal right to act on someone else’s behalf, which can make life much easier if a relative becomes ill or unable to manage their affairs. Banks, utility companies, and other organisations must deal with you, so you’re not left stuck on hold or told they can’t help.
You can manage everyday tasks like paying bills, along with important decisions such as selling a house. Having someone officially in charge can also help avoid family disagreements.
Once the LPA is registered, it stays in place for as long as it’s needed. You don’t have to keep renewing it, and it will still apply even if the person later loses mental capacity.
It also gives peace of mind that someone trusted is ready to step in if needed.
Cons
It takes around 10 weeks to register an LPA, which can be a problem in an emergency. The forms can be long-winded, though you don’t need a solicitor unless things are complicated.
The biggest issue is timing. If they lose mental capacity before the LPA is set up, you’ll need to apply to the Court of Protection for legal authority to act. As mentioned, that’s a much slower, more expensive and stressful process.
There’s also a fee to register each LPA – £82 in England and Wales – and you’ll need to set up two if you want control over both finances and health decisions (totalling £164).
Some people also find the responsibility overwhelming. You must always act in the person’s best interests, which can be difficult if family members disagree or you’re unsure what they would have wanted.
And while companies are supposed to accept the LPA, delays and extra paperwork can still crop up, particularly with banks and insurers.
What you can do right now
There are simple ways to help manage finances, without setting up a Power of Attorney:
Set up a third-party mandate
Contact their bank and ask about becoming a ‘third party’ on their account. This usually means you can discuss the account, check balances and sometimes pay bills. The account holder stays in complete control, but they give the bank permission for you to help out. Just remember, there can be some limitations in how you can act on the account, so its always best to check.
However, it doesn’t offer the same legal powers as a lasting power of attorney, and it usually stops being valid if your relative or loved one loses mental capacity.
Open a joint account
Putting a joint account in both names can make it easier for you to stay on top of the account and manage it. Bear in mind, though, that if they lose mental capacity, the bank will freeze their account. It can also cause problems if family tensions flare later on.
Making money matters simpler
Streamline their accounts
If they have several bank accounts, think about closing unused ones. Having just one or two makes it easier to keep track of spending, passwords and paperwork. Make sure to check the terms of the account, because sometimes these can be for a fixed period of time with restrictions on accessing the funds before the maturity date.
Tell the bank
Letting the bank know your relatives or loved ones are having difficulties with their finances could prompt extra help. Many banks offer support for vulnerable customers in many other forms.
Further help
If you’re helping a parent or relative with their finances, please feel free to talk to us about the support we can provide. For example, we can explain what documents you need and how to register them with us. We see families going through these changes every day and we’re here to make it as easy and as straightforward as possible.