Can you get equity release with a power of attorney? 

What Is Equity Release? 

Equity release is a way for homeowners aged 55+ to unlock some of the money tied up in their home without having to sell it or move out. Often used as a financial boost during retirement, the tax-free cash from equity release can be used for a number of things including clearing existing debts, large purchases and helping family onto the property ladder through a gift.  

There are different types of equity release, like lifetime mortgages or home reversion plans, depending on what suits your needs. It is important to consider how your equity release plan could be affected with a Lasting Power of Attorney (LPA), and how it can be utilised in the future to ensure financial management and decision-making is in line with the homeowner’s wishes in the event of mental incapacity. 

Understanding Power of Attorney (POA) 

A power of attorney is a legal document that lets someone you trust make decisions for you if you’re unable to. It is important to select a trusted individual, such as a family member, as an attorney.  

There are two types: 

Property and Financial Affairs LPA  

This covers decisions about your money, property, and things like equity release. 

Health and Welfare LPA  

This covers decisions about things like medical care and daily routines. This includes decisions about life sustaining medical treatment and personal welfare. It also involves daily routine activities such as eating, dressing, and washing. 

If you’re considering equity release, it’s the Property and Financial Affairs LPA that matters most. With this in place, your chosen attorney can help manage your existing mortgage or set up an equity release plan, even if you can’t make your own decisions anymore. 

How does the equity release process work with a power of attorney? 

Equity release isn’t something you can proceed with quickly; it’s a process that requires advice and consideration. You’ll need to speak to a qualified adviser, choose a provider, and understand what type of plan is best for you. This might involve a lifetime mortgage or a home reversion plan, each with its own pros and cons. Your adviser will discuss the equity release advice process, and any costs and fees associated with it thoroughly before starting any applications.  

If someone is acting on your behalf in order to obtain equity release with a power of attorney, they’ll likely need to provide legal documents, such as a certified copy of the power of attorney, during the application. Having the correct attorney document is crucial, as it ensures the appointed attorney can sign documents and manage financial tasks on your behalf. They might also have to prove that they’re acting in your best interest. Without an LPA, the application process for deputyship can be complex and challenging, adding emotional and procedural burdens. 

Why having a Lasting Power of Attorney matters 

If you lose the ability to make decisions and don’t have a lasting power of attorney in place, things can get complicated. Without an LPA, accessing further funds through an equity release plan may require legal action and can lead to delays and costs if the borrower has lost capacity.  

Setting up an LPA is crucial to ensure control over one’s future financial security. If you do not have one set up, you may need a court appointed deputy in the future which can be a slow, expensive process and the person chosen might not be who you’d want making those decisions. It’s also important to note that once someone loses mental capacity, setting up an LPA is no longer possible. 

Having an LPA already in place gives you control, you can choose who looks after your affairs, and it helps things run smoothly if you ever need equity release. It is important to have an LPA in place while individuals are in good health and possess full mental capacity. 

The role of an attorney in managing your finances 

An attorney under a power of attorney can help with a lot more than just equity release. They can also manage bank accounts and handle tasks such as paying bills and managing investments.  

They can: 

• Pay your bills 
• Manage your savings or investments 
• Make decisions about further drawdowns in a drawdown lifetime mortgage and access further funds if needed 
• Represent your best interests every step of the way 

If they also hold a Health and Welfare LPA, they can support you in decisions about care and daily living too. 

What happens if there is no Power of Attorney? 

If you don’t have a lasting power of attorney and you lose the ability to make decisions, a court-appointed deputy steps in.  

For example, in an attorney case, having an LPA simplified financial processes when an individual became mentally incapacitated, allowing their appointed attorney to act on their behalf without the need for court intervention.  

They’ll manage your finances, including any equity release plans, but they may not know your wishes or personal preferences as well as someone you would have chosen. 

Court Appointed Deputy 

A Court Appointed Deputy is someone appointed by the Court of Protection to make decisions on behalf of a person who has lost mental capacity. This can be a time-consuming and costly process, and it may be refused, leaving the individual without a say in their financial affairs.  

In situations where an individual has lost capacity, a Court Appointed Deputy can be necessary to manage their financial affairs, including their equity release mortgage. However, it is essential to note that this process can be lengthy and may result in additional costs. 

To avoid the need for a Court Appointed Deputy, it is recommended to set up a Lasting Power of Attorney (LPA) while the individual still has mental capacity. An LPA allows the individual to appoint someone they trust to make decisions on their behalf, ensuring that their wishes are respected and their financial affairs are managed accordingly. 

Why a power of attorney matters for equity release clients 

If you’re thinking about equity release, having a Power of Attorney in place can save you and your loved ones a lot of stress down the line. Whilst you’ll need legal advice from a Power of Attorney specialist, it could also be worthwhile discussing the impact of a Power of Attorney on your equity release options in the future.  

A Power of Attorney can ensure your finances are handled the way you’d want them to be, even if you can’t make the calls yourself.  

A Power of Attorney can give your adviser and lender a clear path forward, since they’ll know who to work with and that legal authority is in place. Ensuring you have a Lasting Power of Attorney when taking out an equity release plan ensures decisions can be made by an attorney if the borrower becomes unable to do so. Additionally, understanding the legal considerations surrounding equity release cases with an LPA is essential to avoid complications related to mental capacity. 

Your local equity release experts 

At Bower Home Finance, we’re here to guide you through the equity release process whilst evaluating your individual circumstances to provide the best advice. Searching the whole of the market, our independent advisers will discuss your options in detail and the steps involved before proceeding.  

Find your local equity release adviser today to discuss your options or get started with our free online equity release calculator.  

Find out how much equity you could release from your home