When dealing with the ‘end-of-life’ affairs of a close relative or loved one, several stages of care may be involved. This process can span many years as a person’s health declines; and as their cognitive and mental capabilities begin to deteriorate, it may come to a point where they are unable to make their own financial or welfare decisions.
In such circumstances, it is commonplace for somebody else to take charge and protect their wishes and best interests. The appointment of this person may have been something already discussed and agreed with the affected person. Normally, the one who assumes control of the sick person’s affairs is a close family relative or a trusted friend. To take charge legally, there needs to be a ‘Lasting Power of Attorney’ (LPA) document in place. LPA legally gives delegated authority to the nominated person (or persons) and allows them to make decisions on behalf of the affected person.
LPA and probate, what’s the difference?
When dealing with both concepts, there is some overlap in terms of the rights and responsibilities of the person entrusted with LPA and the person deemed as the executor of an estate under a grant of probate.
While LPA affords an individual the right to handle the affected person’s affairs while they’re alive, a grant of probate does the same after they’re deceased – essentially the distinction lies in when and how they’re able to exercise these rights and responsibilities. The line is drawn at the point that the affected person passes away. The person entrusted with the LPA is responsible for handling their affairs up until the point that they’re no longer alive, at which time the executor of their will becomes responsible for the handling of any finances and affairs according to the wishes outlined in their will.
While it is certainly possible for the person who is entrusted with Lasting Power of Attorney to also be the executor of the will, they require a different legal document to administer the deceased’s estate. This is called the Grant of Probate, and it requires a number of conditions to be met with respect to the lodgement of documentation to HMRC and other entities.
To put it more simply, the following definitions outline the significant points of difference with respect to a Lasting Power of Attorney and a Grant of Probate:
Lasting Power of Attorney: A legal document that empowers the holder to act on behalf of another person while they are still alive, in circumstances where they have become incapable, either through cognitive or physical impairment, to make independent decisions of their own. In the UK, there are two types of LPA – one is for on-going care and health while the other is for property and financial affairs. You can choose to assign your trusted family/friend with one type or both.
Grant of Probate: Probate is the process of administering the estate of a deceased individual. This process is handled by the executor stipulated in one’s will and whose responsibility is to ensure that the wishes expressed in the will are executed. This process may involve handling significant sums of cash or other assets. Naturally, other institutions may be involved – the banks, tax authorities and estate agents – and they need proof that the executor has the power to administer one’s assets properly. The Grant of Probate provides this.
What happens if somebody dies without a will?
When somebody dies without a will, this situation is known as ‘Dying Intestate’. In this instance, a family member has to apply for ‘a grant of letters of administration’. This is similar to a Grant of Probate and is issued by the courts. The person, who becomes known as the administrator, then has the powers to manage the disposal of the deceased estate. The same process applies with respect to the dissolution of an entrusted LPA and the administrator assumes control over the affairs of the deceased.
The distribution of an individual’s estate becomes incredibly difficult in circumstances where no will has been drawn up, particularly when disputes arise among beneficiaries. This process can get messy and often leads to strained or broken relationships, which is why it is always advisable to prepare a last will and testament when you have a chance to do so.
If you’d like to learn more about the processes for appointing a LPA or probate, or you’re interested in discussing the best methods for protecting your finances in the event of your passing, our specialist chartered accountants in London can assist.
Please contact us on 020 7788 8261 or alternatively, send us a message via our Contact Form.
You may also like to check out this post on Dealing with probate.