Do you know how your bills would get paid if you were suddenly taken seriously ill? Vicky Parry explores how to ensure your finances are managed
Some of us have a will that stipulates who should get our money when we die. But most of us don’t have a Lasting Power of Attorney agreement, or any plans for what should happen to our money if we’re still alive but unable to manage it.
Serious accidents, dementia, and long-term hospitalisation are not things most people plan for. But your rent and other regular bills will still need to be paid, and dependents will need to continue your financial support.
Follow these tips to put a comprehensive plan in place should something happen to you that impacts your ability to manage your finances.
Plan early
Don’t wait until you think you might be at risk of illnesses like dementia. Without being morbid, nobody knows what’s around the corner and you can’t plan for things like car accidents or serious acute illness.
Make sure you put plans in place sooner rather than later, and inform the relevant people about all the details so they know how to act if they need to step in on your behalf.
Document everything regularly
Make sure you have details of your financial accounts stored somewhere safe. This includes online accounts, cryptocurrency, and other stocks and shares investments. Print out screenshots or order paper statements on a regular basis, to keep track of transactions and balances. Ideally, lock this information away in a secure box or filing cabinet.
You should not write down your passwords and PIN details stored with the account information. Keep that information separate and unidentifiable so only you can recognise which password is for which account or card. A person with power of attorney (see below) will be able to access accounts with evidence that you are incapacitated, so they will not need to know your passwords, only the account numbers to make it easy to locate them if they need to.
Consider a joint account
Accessing money is tricky enough when someone dies. If they are still alive, it can be even harder. That’s why some people choose to open a joint current account with a loved one that they trust. The other person can access the funds in the account if and when they need to, without going through red tape.
Be cautious with this, however. The funds in the account automatically belong to both of you, so you must be sure they won’t simply drain your account and take your money. They also should have a decent credit score and no defaults, because opening a joint account does financially link you and could damage your own score.
Add an authorised user to a credit card
Adding someone to your credit card is risky as they can rack up bills in your name. However, in an emergency, it can be useful if they need to access some funds but you don’t want to give full access to your bank accounts.
You can’t get a second credit card in your name for the same account, but with most cards you can add a named authorised user. With some cards, such as American Express, you can set a specific limit for the authorised holder, which helps protect you from them overspending on your own credit limit.
Remember, much like a joint account, you must trust the person you are authorising to use your credit card because if they overspend or you can’t make repayments, it’s your credit score that’s damaged.
Prepare an authorisation letter
Banks and building societies have a form called a third party mandate. Filling out this form – but not sending it – means it is ready to authorise if a person needs to handle your financial affairs on a short-term basis.
It will give them temporary access to your bank account, so they can manage your money on your behalf. You can rescind this permission at any point, such as if you have recovered from a serious accident and are now home and living independently again.
If you receive benefits, someone will need to apply to become your appointee. The process is slightly different between Universal Credit and other benefits. The appointee is a representative in your place, so they are responsible for actions regarding claims and payments in the same way as you would be. An appointee can also apply for benefits on your behalf if you are not claiming when you become incapacitated but need to (such as applying for Universal Credit and Personal Independence Payment due to a sudden but long-term debilitating illness).
Add a named authorised contact on utilities
One of the most frustrating things is trying to put holds on utility payments. If you’re not the named account holder, energy, water, and broadband suppliers can’t talk to you. For someone who wants to act on your behalf to pause regular payments (such as if you’re going to be in hospital for a long time), this means a tricky time.
Add a trusted named user to your utilities bills now, and make sure they have the relevant account information. This means they can speak to providers on your behalf without needing your authorisation on the phone every time they need to sort something out.
Council Tax is a large monthly bill for most people, and many aren’t aware that it can be paused or discounted if you are receiving long-term care. Ensure someone is aware of your Council Tax liabilities and the local authority rules around long-term care keeping a person away from their home. They may be able to ask for a discount or exemption on your behalf if you are in hospital or a care home, so ensure your loved one is aware of this to help you save money.
Set up Ordinary Power of Attorney
Most people think Power of Attorney is only ‘lasting’ – but there is another kind. Ordinary POA is designed to help you on a temporary or long-term basis, where you are aware of the need to receive support managing your finances and life admin. For example, if you are experiencing a long-term physical illness, you plan to be abroad for a long period of time, or you have an accident resulting in a physical injury.
Ordinary POA lets you appoint a representative to handle your affairs either for a specified limited time or indefinitely – and you can list which tasks they can deal with. For example, if you only want someone to help manage your finances to pay for your child’s needs while you’re in hospital, you can specify this and they won’t have the power to – for example – sell your house.
Set up Lasting Power of Attorney
Lasting Power of Attorney (LPA) is the one most people think of. It is when someone can manage your affairs long-term because you are mentally incapacitated and not expected to recover. This means it can include things like making healthcare decisions on your behalf, as well as manage finances.
An LPA must be set up while you still have mental capacity. This is why it is important to get it in place when you’re fit and healthy and not anticipating anything to happen!
For both an ordinary and lasting power of attorney, it is recommended that you speak to a solicitor to ensure the wording of any agreement is crystal clear and legally enforceable. You can make a lasting power of attorney on the Gov.uk website, and then need to register is with the Office of the Public Guardian. While you need to complete the forms for LPA, either you or your appointee can register it – and it can be done any time after the forms are completed. This means some people choose to complete the paperwork but not register unless it is needed (although that will cause delays at a time when management of your finances might be required urgently).
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