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The options available if you need help managing your money
The number of people caring for a friend or family member has risen significantly in recent years as more and more people deal with long term health conditions which need the support of others. If you are in need of help managing your money what options are available?
Whether you are housebound, in hospital or just struggle to get out and about regularly, you may find that a carer will end up taking care of many day-to-day actions, payments and purchases on your behalf.
What happens when your carer becomes responsible for paying your bills and dealing with your bank? What options can be put in place when banks and many companies will not speak to anyone other than you, the account holder?
There are a number of options out there that can be of benefit in these situations from formal, legal contracts to informal arrangements between the two parties involved. It is crucial that you trust whoever you ask to help you.
If you have recently received a diagnosis of the early stages of a condition which may affect your mental capacity in the future, such as Alzheimer’s, you will need to talk to a solicitor as soon as possible. They can help you to plan for the future and deal with your money by putting procedures and documents in place such as a power of attorney.
Power of attorney
Power of attorney is a particularly useful tool and can provide you with the legal peace of mind to get your affairs in order. You will need to be in sound mind to set up a power of attorney and it is particularly worth doing if you have recently received a life changing diagnosis.
Your mental capacity when making this decision will be assessed and solicitors, doctors etc. will be looking at your ability to make or communicate your specific decisions at the time. They will be trying to ensure that you understand the decision you are making, why it needs to be made and the possible outcomes and implications of the decision.
There are three types of power of attorney: an ordinary power of attorney, a lasting power of attorney and an enduring power of attorney.
The ordinary power of attorney can be a temporary option and will only be valid whilst you still have the mental capacity to make your own decisions. It allows you to grant someone the permission to manage your money for you for a specific period of time, such as when you are in hospital or out of the country for a period. If you lose mental capacity an ordinary power of attorney becomes invalid for any further transactions.
A lasting power of attorney differs from the above because it is a document that lasts forever but it will only kick in if you lose the ability to carry out your own affairs (if for example you are in a coma) and until then you have the freedom to carry on as normal.
It is a way to give someone you trust, such as a friend or family member, the authority to make decisions on your behalf should you be aware that you may become too ill in the future to make your own decisions or carry out your own affairs.
Whoever you choose as your attorney, acting on your behalf, has the power to act financially for you – by carrying out actions such as paying the bills or selling your house – and act in a health and care capacity – by deciding on your medical care and where you should be living based on your condition.
It is an important document that places a lot of responsibility on your attorney so it is advisable that you make sure you can trust the person before naming them on this document.
An enduring power of attorney was replaced by the lasting power of attorney in October 2007. If you have an enduring power of attorney, it can still be used and there is no need to change it to a lasting power of attorney.
However if you have a physical disability, visual impairment or a condition which does not affect your mental capacity, you could use one of the options listed below to allow your carer to manage your money for you on a day-to-day basis. It is worth being aware that if your mental capacity does deteriorate then these options may become invalid and your accounts are likely to be frozen unless there is a power of attorney in place.
A joint account can be useful, particularly if your carer is a close family member, as it gives them the authority to make your payments for you and deal with the money going in and out of your account. They will have equal access to your money so you must be able to trust them as there is little you can do if they take advantage of your trust.
Be aware that as it is a joint account, you are both liable for any debts that are run up on the account and all money in the account belongs to both of you equally in the eyes of the bank.
This can be a much safer option as you transfer a set amount of money into the account on a regular basis and your carer can use the money in this account as and when you request. When setting up the account, you can set limits such as not having an overdraft to limit your risk.
However, this may not be a good option if you are unable to do your own banking for whatever reason as you would not be able to transfer the money across to this account as required.
Many people find it useful to set up standing orders or direct debits for regular payments or use telephone or online banking. If you are not computer-literate there are many voluntary organisations who can help with coaching / training.
Prepaid card account
Prepaid card accounts can be set up and given to your carer which they can use when required. As you need to load money into the account, you know that they won’t be able to spend more than what is in the account.
Again, this may not be a viable option if you are unable to do your own banking and you should also be aware of ‘inactivity fees’ for infrequent use of the account and potential usage charges.
Third party mandate
This gives a third party, such as your carer, family member etc., the permission to spend money via your bank account. You will be able to set restrictions and limits for their use such as not being able to close your account, arrange an overdraft on your behalf or open other accounts in your name.
Keep in mind that you are responsible for the account and any debts run up on it. So if your carer goes into your overdraft and runs up debts, you will be the one that is held responsible for this as the carer only has the mandate to act as an agent on your behalf.
There are restrictions regarding the set-up of third party mandates regarding your mental capacity, you should understand what you are doing and the potential consequences of this. It is relatively simple to set up a third party mandate and the steps include:
- Completing a form in branch or downloading to post back to your bank. For joint accounts setting up a third party mandate, both account holders will have to sign the form.
- The third party you are setting up the mandate for will have to provide your bank with their ID details such as a passport/driving licence and a recent utility bill.
To find out more about power of attorney, get in contact with a solicitor and take a look at this blog from Age UK. For information regarding carers and money, get in touch with your bank, an independent financial adviser (IFA), Citizens Advice or visit the Carers UK charity website.
For more information on this subject, check out this blog by finance blogger, Savvy Woman.