Common Misunderstanding with Lasting Power of Attorney

Save time, effort and money in the longer run, more importantly save our family from potential disputes.

FSMOne.com Apr 24, 2018 3047

When it comes to doing up Lasting Power of Attorney (LPA), many will feel uncomfortable to empower someone to take over the decision making and have access to their assets to take care of one’s welfare and financial interest in the longer run. There are a few contributing factors towards the slow take up of LPA, namely; many do not fully understand how LPA works and hold misconceptions about how things can carry on in the event that one loses mental capacity.



Some common assumptions
  1. Our loved ones will gain access to assets immediately when we lose our mental capacity.
  2. I have my Will and nomination done, so everything should be taken care of.
  3. Our loved ones can decide amongst themselves on who to be empowered to make the different financial decision for us.
  4. Once we have LPA done, our Donee will have full control over our assets and decisions.
Our loved ones will gain access to assets immediately when we become mentally challenged

In the event that we lose our mental capacity and our loved ones wish to have access to our monies and other assets, they need to apply to court to be appointed as Deputy , which is time consuming and costlier than doing up a LPA. More importantly if the family cannot come to a consensus on who to be appointed more time will be delayed.


I have my Will and nomination done, so everything should be taken care of

Will and nomination only take effect after we pass on. Whereas LPA takes effect when we start to lose our ability to make good judgements and decisions could have been taken that may compromise ourselves. Our appointed Donee can quickly assume the rights and ensure everything goes on as usual.


Our loved ones can decide amongst themselves on who to be empowered to make the different financial decision for us.

Some of us may have complicated financial circumstances or extensive wealth and businesses that require different individuals to take care of different aspects. Example, some of us may have different companies with different shareholders, or different properties with different investors under tenancy in common. Hence it is no longer a straightforward empowerment of an individual as Deputy. On top of that, some families may have disputes on who to appoint to make the decisions. Hence the whole process can be long and arduous and cause many unnecessary issues and complications, which may result in financial losses.


Once we have LPA done, our Donee will have full control over our assets and decisions

Firstly, even with LPA in place, Donor can revoke or replace their LPA anytime while they have a clear sound mind. Donee will only start to assume power as the donor loses their capacity to make sound judgements. The power given to the Donee, and the amount of money that can be accessed is restricted. In the event of Donee abusing their power, or neglect the interest of the Donor, their power can be stripped and there are cases of such scenarios happening.


Conclusion

LPA is a convenient and cost-effective legal document that can prevent many potential family conflicts and complications. It gives us a peace of mind and less fuss in the longer term, with its robust fair system.


If you are interested to find out more on Estate Planning, please contact estate.planning@ifastfinancial.com.



References:
Singaporeans urged to do an LPA
2 stripped of Lasting Power of Attorney to decide for loved ones
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1 A Lasting Power of Attorney is a legal document that gives authority to the person you appoint (called your “Donee”) to make decisions and act for you when you lack mental capacity. The applicant of this legal document is also referred to as the “Donor”.
2 A Deputy is a person appointed by the Court, who is given the authority to make decisions on behalf of a person who lacks mental capacity (“P”) in relation to his personal welfare and/or property and affairs.