Do you need a power of attorney if you have a joint bank account?
A lasting power of attorney (LPA) is a legal document that allows you to appoint one or more people to make decisions on your behalf during your lifetime.
Many older people put a LPA in place so they can be sure there is someone they trust to look after their affairs if they became unable to do so. This might occur because of an illness, accident, or old age.
There are two types of LPA: health and financial. The people you appoint to manage your affairs are called the ‘attorneys’.
A health and care LPA lets your attorney make decisions about your medical treatment and day-to-day care. A financial LPA lets your attorney make decisions about your money and property. This can include paying your bills, selling your property, and collecting your pension and benefits.
A recent survey by campaign group Which? found many people have a poor understanding of how LPA’s work and why they are needed.
Lasting power of attorney and joint decisions
When planning for their latter years, many couples think they don’t need a LPA because they already have joint bank accounts and make joint decisions.
However, this doesn’t negate the need for a LPA for several reasons.
Firstly, on the death of one joint bank account holder, the ‘rules of survivorship’ apply. This means the account is automatically transferred into the sole name of the surviving joint bank account holder who will be allowed access to all the funds within that account.
But the situation is different if a joint bank account holder becomes mentally incapable of managing his or her finances.
Technically, if one joint account holder becomes mentally incapable then they can no longer consent to the continued use of, and access to, the joint bank account by the other joint holder.
As a result, the bank or building society could freeze the account and limit access to the funds in it.
Secondly, many older couples would be well advised to appoint attorneys who are adult children or other relatives, as opposed to one another.
In theory, an older person could add an adult child to their bank accounts or open a joint account together. But this is problematic, as granting relatives ‘informal’ access to bank accounts means older people are putting their finances at risk and could be subject to financial abuse.
In the event of their death, the money would be transferred to the surviving account holder, rather than distributed in accordance with the terms of the deceased person’s will.
Protection and peace of mind with a power of attorney
There’s much more protection if a LPA is in place. When an LPA is activated, the attorney’s activity will be supervised by the Office of the Public Guardian (OPG).
Nicola Crosbie, director of Moran Wealth Management, says: “It is so important to have an LPA, but a task that is often overlooked. The need for a will is highlighted much more – as an industry, we do not seem to talk enough about the necessity for an LPA and the reasons for having one.
“Even if you have joint accounts, it does not automatically mean you will be granted access. Often, assets can be frozen or there are difficult hoops to jump through. You may, in fact, be acting for someone who you do not have joint finances with.
“For peace of mind, implementing this will ensure you are confident in the knowledge that, if you lose capacity, or feel unable to make your own decisions, your trusted person can step in for you. There is a need for all ages.”