Equity Release and Power of Attorney in 2022
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A power of attorney can complement equity release by providing peace of mind if you need to rely on outside help with day-to-day finances or if you want someone else to have the ability to manage your finances or obligations for you.
We’re here to help you understand exactly how equity release and power of attorney can work in tandem.
Here’s what you’ll want to know!
Can You Take Out Equity Release With a Power of Attorney?
Yes, you can take out an equity release plan with Power of Attorney (POA), however, it depends on the type of Power of Attorney in place.
When it was signed, and if court protection was involved.
An Enduring Power of Attorney (EPA) was the norm prior to 1 October 2007, which was a document granting permission for an individual to manage the affairs of someone mentally incapacitated.
Enduring Power of Attorneys are no longer open to applications, but existing documents are still relevant today.
However, equity release lenders will only accept these POAs if they come with court protection.
Lasting Powers Of Attorney are legal documents arranged in advance, giving someone permission to run your affairs, should you become incapacitated.
A Property and Affairs LPA is relevant for an equity release plan.
Some lenders may require additional documents, but your equity release lender will guide you through these requirements.
Can My Parents Release Equity if I Have a Power of Attorney?
Yes, they can, as long as you can prove to the lender that your parents will directly benefit from the equity release plan.
With an increased cost of living and people living longer, equity release could help you pay for your parents’ expenses when they are no longer lucid.
Some lenders may have additional safety measures in place or require additional documentation.
But, what’s most important is that your parents’ PoA has been registered with the Court of Protection.
Why Should Equity Release Clients Take Out a Power of Attorney?
By having an equity release and power of attorney1, someone else will still be able to manage your affairs (including arranging the process of equity release) on your behalf.
As such, even if you are alive but unable to make decisions for yourself,.
The equity release providers can go ahead with releasing more equity without having to wait until you pass away or become incapacitated before they take action.
This allows them the flexibility that might otherwise be lost because they need permission.
In addition, it gives them more options regarding who carries out tasks like transferring money or signing documents for you.
A typical power of attorney generally costs around £500. In comparison, equity release cost starts from just over £1000 (based on average prices).
The cost includes arranging all paperwork, a valuation, and equity release advice, but there may be additional fees depending upon how much equity needs to be released.
It’s also worth noting that equity release is not a form of bankruptcy and does not affect your credit score in any way.
How Exactly Does a Power of Attorney Affect You?
Equity release and a power of attorney go great together.
However, equity release providers need to make sure that equity is released in a way that does not affect the lifetime benefits available for you or your loved ones.
Meaning equity needs to be given back gradually when it will have the most negligible impact.
This is done so there are no sudden changes on any state pension2 entitlements, care home fees, and housing cost assistance payments which may result from an equity release being carried out too quickly or all in one go.
And get this!
A power of attorney enables somebody else to act as if they were the person who owns assets (or held power) even though they don’t own said assets themselves.
For example, a power of attorney agreement allows someone with this title to be responsible for specific aspects such as health or finance and acts on your behalf.
This agreement can be registered with a solicitor. It will last until it is canceled by the grantor of the power of attorney or they die.
It also needs to be renewed every time an event may cause change, such as illness or changes in circumstances.
A person who has been appointed as trustee3 for the power of attorney will be considered as if they are the equity releasing client in a transaction,.
Thereby enabling them to instruct an equity release provider on behalf of the client.
The equity release provider then completes all relevant documentation that would otherwise require you to sign off yourself.
This means that you don’t need to attend personally at any stage during or after completion.
3 Major Benefits of Having a Power of Attorney
- Equity release and power of attorney can work in tandem to protect your equity release interests, meaning that you are looked after by 2 people who care for you.
- With equity release, someone else will be able to look after your financial affairs, which will be an important consideration should you no longer have the mental capacity to act for yourself.
- Equity release with power of attorney allows you and equity release providers alike to safeguard your interests without incurring any additional costs.
3 Possible Drawbacks of Having a Power of Attorney
- Equity release with power of attorney won’t be a suitable option if you have no family or friends and are estranged from your relatives. Equity release providers will need to take responsibility in such cases.
- As a parent, you might not want your child to access your money, without your permission, while you’re still alive.
- It can be hard getting new trustees appointed should the first choice die or become incapacitated.
Is It Difficult to Have a Power of Attorney for Your Equity Release?
Several equity release providers now offer equity release combined with the power of attorney services.
It gives their customers greater peace of mind by giving them complete control over their financial affairs and property management4.
This is sometimes referred to as an “all-in-one” solution because it provides equity release and full responsibility for managing your finances on an ongoing basis.
So, for example,
It would be possible for someone seeking equity release which also needs long-term care in later life to request a power of attorney from one person or company which has experience in both disciplines.
Most likely a solicitor or accountant – while they retain some level (if any) of equity release.
The equity release industry is always committed to providing choices for consumers.
This solution provides just that in a package deal that reduces the need for out-sourcing responsibilities when you are most likely already feeling vulnerable.
As well as giving peace of mind, it guarantees freedom from financial worries, which may lead people with long-term health conditions into debt or bankruptcy.
Something they would not want to burden their loved ones with should anything should happen to them.
While equity release may seem like a good answer for you if you have equity in your home, the fact is that equity release will not work if you have secured loans against your property.
Equity release should only be an option at retirement age or when eligible to draw on pensions and social security benefits.
When Should I Make a Power of Attorney Agreement?
A power of attorney is a legal document that can be in the form of an enduring power of attorney (EPA) for individuals who cannot make decisions themselves due to illness, injury, or old age.
The second type is a power of attorney for property (PAP), which is needed when someone has to manage their affairs but cannot do so without help.
Both equity release and the power of attorneys are essential legal documents that should be considered at the same time as they can work well in tandem.
Do I Have Complete Control Over My Finances if I Grant Power of Attorney?
This will depend on the terms of your power of attorney. You can still use equity release to access funds and up to £12,000 in savings if you have a power of attorney and someone tries to make money without your permission.
Why Should I Combine Equity Release With Power of Attorney?
This will give you more substantial control over the finances when someone tries to make money without permission or if something happens that prevents them from doing this themselves.
Are There Other Documents I Need When Granting Power of Attorney?
You will need to complete a power of attorney form. You can then specify what type of power you want the person who has been granted this document to have over your estate and property.
Planning for your retirement can provide you with peace of mind when knowing that if anything were to happen to you that impaired your ability to make decisions, someone trusted could help you.
This is an effective dual protection system. You have your equity release set up as a backup plan should something go wrong while you’re alive.
Power of attorney ensures that two people would step forward if needed without complications on either side.
Just make sure that your power of attorney is someone you trust to make the right decisions for you and your family.
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