Do I need a Lasting Power of Attorney with equity release?

Arranging an LPA can bring considerable peace of mind

A Lasting Power of Attorney (LPA) is a legal document that allows you to nominate the people you trust most to make important decisions for you – and about you – if the need arises. One of them in particular could be very important if you take equity release.

To help you understand these essential documents and their connection to equity release, we will be discussing the following:

• What is a Lasting Power of Attorney?
• What is equity release?
• Do I need a Lasting Power of Attorney with equity release?
• How do I arrange an LPA?

What is a Lasting Power of Attorney?

Arranging a Lasting Power of Attorney (LPA) is an important step you can take now to ensure that you and your family have protection – and peace of mind – in the future.

There are two different types of LPA:

• Health and Welfare Lasting Power of Attorney
• Property and Financial Affairs Lasting Power of Attorney

You can read more about each of these types of LPAs and how they work in our article ‘What is a Lasting Power of Attorney’.

If you have an accident, suffer a stroke or receive a dementia diagnosis in the future then you may need your family or a friend to carry out some duties for you. An LPA will ensure that the people you choose are legally able to help.

Don’t assume your next of kin will automatically have the right. Only an LPA can guarantee the people you choose can legally handle your finances and make important decisions when you need them to.

Remember, you can only arrange an LPA when you have the mental capacity to do so. It makes arranging them now, while you’re able to, so important.

What is equity release?

An equity release plan allows homeowners who are 55+ to unlock some of the tax-free cash from your home.

There are two main types of equity release plan: lifetime mortgages and home reversion plans. Lifetime mortgages are more popular and most of the equity release plans taken out in the UK are of this type.

There are typically no monthly repayments to make with a lifetime mortgage as the loan plus interest is only repaid when you pass away or move into long-term care. At this point your home will be sold to settle the loan. 

There are further choices and features which enable you to tailor your plan. These include:

• Enhanced lifetime mortgage. If you have a qualifying health condition then you may be able to unlock more cash or lower interest rates. 
• Interest-only lifetime mortgage. These let you prevent or reduce interest from accruing on your loan by paying off some or all of the interest each month. 
• Drawdown lifetime mortgage. Release some cash now, then access further funds in the future as and when you want to. This can save you a significant amount of interest over time.

Home reversion plans, on the other hand, involve you selling all or part of your home to a reversion company in exchange for a tax-free cash lump sum. You then live in your home as a tenant but without paying any rent.

Not 55 or over yet? You may still be able to access some of your equity. Read our blog to explore how to release equity if you are under 55.

If you’d like to explore your options for equity release, simply call us on 0808 178 3055 or request a call back for a time that suits you, and we’ll arrange an appointment with one of our selected advisers. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.

Do I need a Lasting Power of Attorney with equity release?

An LPA can offer additional peace of mind for homeowners who have arranged an equity release plan. 

A Property and Financial Affairs LPA isn’t mandatory when you arrange equity release. However, if you choose a ‘drawdown’ lifetime mortgage then your equity release adviser may recommend you arrange one either now or later down the line. 

Here’s why your LPA could make all the difference in the future:

• Single homeowners. If your equity release plan is solely in your name then only you have the ability to request further drawdowns from your cash facility. If you were to have an accident or get diagnosed with dementia, you would need an LPA to be in place for your loved ones to access any further funds you may want or need.

• Joint homeowners. If you and your spouse/partner arrange a drawdown plan together then both of you will need to sign for advances from your cash reserve. One of you cannot sign on behalf of the other. In the event of an accident or loss of mental capacity, an LPA will need to be in place to access additional funds.

Nobody wants an equity release horror story, so putting the right protections in place now could save you a lot of worry in the future. Arranging your Lasting Power of Attorney helps to ensure you’ll always be able to access your cash facility if you need to.

How do I arrange an LPA?

The government website GOV.UK offers a DIY LPA arrangement service online for those wanting to save on solicitors fees. 

However, if you prefer to have a professional arrange and check your documents on your behalf, speaking to a local solicitor may be a better option for you.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn