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Why January is the start of serious financial discussions

January is never a cheerful month, but contemplating dementia (or any loss of mental capacity) or divorce is always difficult. It’s a topic that often crops up because Christmas is a time when families have spent significant time together and it’s easier to see life’s changes unfolding, as Simon Prescott explains.

Many reading this may still be focusing on trying to get through Dry January and Veganuary after their holiday excesses – especially if they made it past Fail Friday (21 January 2022), as the third Friday of the month is the date by which most New Year Resolutions have failed. Others may be grappling with a more fundamental change in their lives, given this can also be an unfortunate time of the year for two significant changes in particular: divorce and dementia.

January has long been known as ‘divorce month’ for good reason. Christmas puts a lot of pressure on people to strive for perfection. This year may see even more of a focus on divorce ahead of the April 2022 introduction of the Divorce, Dissolution and Separation Bill in England and Wales.

Other discussions – and the ones I will focus on today – may stem from one generation of a family of clients seeking confirmation over fears of dementia or other mental incapacities increasingly affecting a member of their family.

But why is it that Christmas is so often a time when fears become real?

Unfortunately, it’s not merely a set of circumstances that can be attributed to the 2021 holiday season and a time when we could finally celebrate our customs with family and friends for several days, having not been able to do so in 2020 – a time the UK’s Alzheimer’s Society termed the ‘Lost Christmas’. Even before the pandemic, the season resulted in the increasingly common conclusion among relatives that someone was definitely suffering from dementia symptoms. It’s usually recognised by those visiting for the first time in a while, as those who see their relatives on a regular basis often fail to see the creep of incapacity.

Christmas is also a holiday when any decrease in faculties can be more noticeable to visitors for two more reasons.

The first is that a lot of planning and preparation is required. Christmas is a time when people’s mental faculties are tested, from the distribution of multiple gifts, the state of the host’s home in comparison to previous visits, through to the timing required to get the many elements of Christmas lunch correctly cooked and served at the same time. As a result, faculties may fail.

A second is the day’s schedule is often one of family tradition, but it is different from any other day, whether you’re watching the Queen’s speech or not. The break from the typical routine can enhance the odds of new frailties in mental health becoming apparent to other family members.

And it is typical that family members start the conversation on the topic as it’s a condition that the sufferer may not be aware of, or interested in self-diagnosing. Despite some encouraging developments in terms of prospective therapies, there is still no cure. Instead, health professionals may only suggest treatments that may delay the onset or slow the damage caused by the various illnesses.

But while the conversation is difficult, it doesn’t make it any less important, as although there is a focus on physical elements of your health, your mental health is vital too. This is why it is included in the latest thinking from Harvard Medical School in their SHIELD acronym. This encompasses sleep, stress levels, [social] interaction, exercise, learning [new things], and diet.

Why would you involve a wealth manager?

Although your first conversation should be with your family and a medical practitioner, I would also include your wealth manager on your list of people to speak to. Why? Because of the opportunity to put financial support in place. The experience and guidance of a professional financial adviser not only relieves anxiety levels for the person for whom the measures have been implemented, but also – we find – for the rest of the family.

The start of 2022 is also a good time to start talking with family and your financial adviser ahead of the updated advice on Lasting Powers of Attorney (LPA) due in spring 2022. These changes come despite the amendments made in 2015, following their initial introduction in 2007, whereas other pieces of financial legislation, such as inheritance tax, have largely stayed untouched for decades.

And any discussions can take place now as we expect the multiple types of LPAs will continue to exist. Instead, the changes mainly focus on the growing need for digital versus paper services, and the maintenance (and probably expansion) of the essential protections that prevent people abusing their capacity to control the actions and consequences for another person’s health and financial assets.

So what interventions can be available?

The first – and most basic – is a general power of attorney. It offers people named in the document a limited level of authority over your finances, but it usually only applies for a specific purpose – for example, support with regard to a particular (named) asset, or for a specific action to be executed – and it is only in force for a limited period. In addition, the document becomes worthless if a doctor declares that you have lost any mental ability.

The second type of document is a Lasting Power of Attorney (LPA) of which there are two different versions and which are much more powerful than the general form. This is because they continue to apply regardless of your level of mental capacity at any future date.

The first of the LPAs covers health and welfare and may only be used if you are found to be mentally in need – it cannot be used if you are deemed to be completely capable of self-determination, i.e. have mental capacity. It allows others to make decisions in your best interest regarding where you live, who can visit you, and what kind of care you might receive. It can also enable you to authorise an attorney to allow or decline life-sustaining care on your behalf, but these requests must be detailed in the document in order for them to be effective.

The second LPA, which takes the place of the now defunct Enduring Power of Attorney, concentrates on your financial and property affairs. Unlike the health and welfare LPA, however, it can be used by your attorney(s) whatever your mental state, but only if you so choose. You can constrain the circumstances to a time when you need it or allow it to be used in other circumstances. As such, it is worth a conversation, not least as it may come in useful if you are physically unable to manage your funds for an extended period of time.

For either to be valid, both must be drawn up independently and recorded with the Office of the Public Guardian, and having one does not mean that someone can act on your behalf in situations covered by the other. Both require you to be fully mentally capable when they are being  drawn up – akin to the testamentary capacity that is a vital factor in the making of a will and without it, a will is invalid.

Why is financial advice important?

If you’re in the UK, it is worth noting that the LPA forms are easily accessible on the government’s website (along with some guidelines and other supporting paperwork) and can also be completed online, although we would still recommend seeking advice. There may be financial ramifications that you and your loved ones are unaware of and professional support – which should include independent legal assistance – will allow you to align the decisions outlined in your LPA to other important documents, for example your last will and testament. We can also ensure it is linked to your overall wealth plan (and any specific sub components, such as decumulation). This approach can also encourage you to file an LPA earlier than is customary.

As far as I am concerned, however, one of the most important reasons is that financial advice will reduce long-term stress for you and your loved ones, as well as provide much more support for the important decisions which lie ahead.

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how wealth planning can help them achieve their financial goals and objectives, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we can help you with wealth planning support, or more specifically support in planning your retirement, please contact us on the same number as above, or complete the contact us form using the link below.

Any examples of investments and structures used are for illustrative purposes only. The inclusion does not constitute an invitation or inducement to buy any financial investment or service. None of the content constitutes advice or a personal recommendation. Individuals should seek professional advice, based on their jurisdiction and personal circumstances, before making any financial decision.

about the author

Simon Prescott

Simon Prescott

Simon’s role is to work with our UK and international clients, and their families, to help them structure their investments and other financial assets to achieve their goals and aspirations, through the development of bespoke wealth plans. The planning process starts with an assessment of clients’ current finances, before developing individual scenarios using cashflow modelling. The plans are then regularly reviewed in the context of clients’ changing lives to ensure they remain on track to see their plans come to fruition.

 

His appointment followed the establishment of bank’s wealth planning function, where he was instrumental in its design, build and implementation. Simon has over 20 years’ experience of delivering investment and planning advice. He has worked for Nedbank Private Wealth since 2007, when he started with the firm as a private banker.

 

Simon holds the Level 7 Diploma in Advanced Financial Planning, the highest financial planning qualification in the UK, and is a Certified Financial PlannerTM, a Chartered Wealth Manager and a Chartered Fellow of the Chartered Institute for Securities & Investment.

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