Can a Joint Bank Account Be Used Instead of an LPA?
01 February 2019
Joint bank accounts do not offer any financial protection, unlike a Lasting Power of Attorney (LPA). When an LPA is activated, the attorney's activity will be supervised by the Office of the Public Guardian (OPG). The activity of joint bank account holders is not monitored by any governing body, meaning that individuals are relying entirely on the goodwill of their relatives.
A Quarter of Over-45s Have Access to a Relative's Bank Account
Despite this, a significant number of adults in the UK are giving their family members unregulated access to their finances. In a recent survey carried out by Co-op, we spoke to 2000 over 45 year olds. A staggering 25% told us that they have access to a relative's bank account who isn't their spouse.
Of these, 18% have access to their relative's bank card or the log in details to their online banking, while 7% have set up formal joint bank accounts. Of those that have set up joint accounts, over 35% said this was with a parent, with 18% having a joint account with a sibling.
By setting up joint accounts with relatives or granting them informal access to bank accounts, people are potentially putting their finances at risk. Often issues only come to light after death, when bank accounts come under closer scrutiny and evidence of financial abuse may surface. This can cause significant distress for those left behind and can also add years to the Probate process.
Furthermore, this type of arrangement can also place the family member (who was added to the account) in a position whereby they could face allegations of financial impropriety after the account holder's death, because they weren't accessing the account under the correct legal process of using an LPA.
Another major consideration when holding a joint account with a family member is that upon death the account and its contents will automatically pass into the name of the surviving owner. This means that the money may not be included as part of the deceased person's Estate and not distributed in line with the terms of their Will.
A more secure and legally robust way for someone to grant a relative access to their finances is to put a Lasting Power of Attorney in place.
How Does a Lasting Power of Attorney Work?
A Lasting Power of Attorney is a legal document in which you can appoint one or more 'attorneys' to make decisions on your behalf about your healthcare and/or your financial affairs. Your attorney should always be someone that you know and trust and they must be over the age of 18.
Please note that for a Property and Financial Affairs LPA, your chosen attorney cannot be bankrupt or subject to a Debt Relief Order. More guidance on choosing the right attorney can be found on Gov.uk.
In England and Wales, there are two types of LPA available. One covers health and welfare while the other covers property and financial affairs. It's possible to just put one type of LPA in place, or to have both types running alongside one another.
You can choose to activate your LPA only when it is needed. For example, if you have said that you would like your attorney to be able to access your bank accounts because you have mobility issues, then it could be activated straight away. Alternatively, you may only want to grant your attorney access to manage your finances when you no longer have capacity to make your own decisions. In this case, the LPA will only be activated if and when this happens.
Once the LPA is registered, the activity of the attorney(s) will be overseen by the Office of the Public Guardian (OPG). The OPG's main priority is to safeguard people who are unable to manage their own finances or make their own decisions. Therefore, they supervise the activity of appointed attorneys to ensure that they are acting in the best interests of the individual. If they believe this not to be the case, then they will launch an investigation and they have the power to remove an attorney and appoint a replacement if they see fit.
How to Set Up a Lasting Power of Attorney
Of those that we surveyed, 79% told us that they don't yet have a Lasting Power of Attorney in place. Despite what you may think, it's really quick and easy to set up an LPA with professional support, and with Co-op Legal Services it costs from just £225 (+ VAT) for a single LPA.
It's important to note that only you can make your LPA, and you need to have sufficient mental capacity in order to do so. No one can set up an LPA on your behalf once you've lost the ability to make your own decisions, so if you wait until it's needed then it'll already be too late.