No-one knows what the future holds, which is why it is important to make plans now, while you can. Making a Power of Attorney allows you to plan in advance who you would like to act on your behalf in the event of you being unable to manage your own affairs.
It may be that you are simply out of the country for a while and need someone to manage your financial affairs whilst you are away. You may develop an illness or have a serious accident that leads to a loss of mental capacity. In this case, having Lasting Powers of Attorney in place will be vital to ensure those you trust can manage your affairs for you.
There are many considerations and questions before you commit to a Lasting Power of Attorney; here we provide you with the answers to a variety of questions in order to set your mind at rest and help you understand what is involved. To discuss your situation in more detail, please contact a member of the Private Client team.
A Lasting Power of Attorney (LPA) is a legal document that provides a donor (the person writing the LPA) with the power to choose an attorney who would then have authority to act on your behalf in relation to your finances and/or your health and welfare.
LPAs replaced Enduring Powers of Attorney (EPA) in 2007. Whilst it is no longer possible to create a new EPA, any EPAs made prior to October 1 2007 are still valid, can be registered and can be used. If you do already have an EPA from before this date, you should note that this only covers property and financial affairs, so you may wish to consider having a health and welfare LPA written in addition to your existing EPA.
There is often a misconception that Powers of Attorney are set up only when an individual gets older or when their mental capacity is in decline, for example if they are diagnosed with dementia or suffer a stroke. In fact, it is important that Powers of Attorney are set up sooner rather than later and certainly whilst an individual has the requisite mental capacity to understand the arrangement.
Having LPAs in place doesn’t necessarily mean that you have lost capacity, however an LPA for Property & Financial Affairs is particularly useful as this can be used whilst you still have capacity, but only with your permission. Therefore, if for example you are abroad or unable to sign a document due to a broken arm, it doesn’t necessarily mean you have lost capacity. By having an LPA in place, it is a useful document to have as a safeguard in the event you need the support of an attorney. In comparison, an LPA for Health & Welfare can only be used if you were to lose capacity.
Loss of mental capacity will be different for each person; generally it means when an individual’s ability to make decisions independently is diminished. A person may be able to make decisions about general day-to-day matters but not on more complicated areas such as investments or payments. An LPA can be a valuable legal tool in specifying which areas of your life you wish an attorney to manage.
An LPA for property and financial affairs allows your attorneys to deal with a variety of matters including, but not limited to:
Your attorneys can use it before you have lost capacity, but only with your permission, as well as when you have lost mental capacity.
An LPA for your health and welfare authorises your attorneys to make decisions on your behalf in relation to your healthcare and wellbeing including, but not limited to:
Unlike an LPA for property and financial affairs, this LPA can only be used once you have lost mental capacity.
If you were to lose mental capacity without an LPA in place, your family will have to apply to the Court of Protection (CoP) to appoint a deputy on your behalf. This comes at significant cost and can take a considerable amount of time to complete at a time that is likely to be distressing. The CoP may also make a ruling that would fall against the person’s wishes. We therefore recommend anybody of any age putting an LPA in place.
If you run a business or you are a partner in a partnership agreement, you may also wish to consider a business LPA.
A business LPA is a type of financial LPA that deals with your interests in a business and its assets rather than your personal financial matters. For example, important decisions may need to be made if the business owner was:
In order to understand if a business LPA is right for you, you must take into consideration the type of business you have. If you are a director, partner or a sole trader you will have inevitably spent a vast amount of time, money and effort investing in the business. Therefore, if you do not have the capacity to make decisions it is vital you have had your say in who you want to appoint to ‘take over’ and continue to make decisions on your behalf, or risk the business failing.
If a business LPA is not made and the owner of the business was to become incapacitated, others are able to make an application to the Court of Protection in order to appoint an individual to act on the owner’s behalf. However, this is expensive, time consuming and the Courts may not choose someone the owner would have chosen, which in turn would put the business at risk.
One of the key considerations when drafting a Lasting Power of Attorney is who to appoint as your attorney(s). LPAs are essentially based on trust and as such, it is important that you choose people who are absolutely trustworthy, who are going to be capable of making decisions on your behalf and who you feel understand your wishes, values and beliefs.
You can choose to appoint one attorney although in most cases we would recommend appointing more than one in case one attorney is unable at any time to assist you. Your attorneys may be friends or family members or you can appoint professional attorneys, such as a solicitor or an accountant.
If you are appointing more than one attorney, then it is also important to consider how they will work together in one of the following ways:
Each of these variations comes with its benefits and restrictions relating to accountability and absences, which is why it is important to seek legal advice when making such decisions.
All attorneys have a duty of care when making decisions on your behalf. They must act with honesty and integrity and must not take advantage of their position.
The Mental Capacity Act 2005 and the Mental Capacity Act 2005 Code of Practice set out the key duties of an attorney and the key principles that attorneys must follow when making decisions on your behalf.
The fundamental responsibility of any attorney is that they must act in your best interests regardless of the type of LPA that they are appointed under. As a result, attorneys must have your personal, political, cultural, moral and religious views and values at the forefront of their mind when making any decisions on your behalf. In doing so, they must ensure that their own interests, values and beliefs do not cloud their judgement. They must also take into account all of the relevant circumstances and not just those which they consider important.
An attorney must also:
There are certain tasks that an attorney is not permitted to make decisions on, such as:
If anybody has any concerns that an attorney is misusing their authority under a POA then they should contact the Office of the Public Guardian who will investigate reports of misuse and will take appropriate action. Such action can include making a recommendation to an attorney but they can also refer matters to other agencies or to the Court. The Court then has the power to cancel an LPA completely or remove an attorney.
You or another attorney on your behalf can also bring legal action, if appropriate. Such claims can include undue influence or a breach of trust and/or fiduciary duty. However, we would recommend seeking legal advice before doing so.
While an LPA is a legally binding document, it is only effective if it is registered with the Office of the Public Guardian.
Once the LPA has been registered, changes are not allowed to be made. If you wish to make any changes to an LPA before it has been registered, you can do so as long as you make your attorneys aware of the changes.
You are not required to register your LPA once you have drafted it and there are certain advantages and disadvantages to immediate registration of your LPA, which we can discuss with you in further detail.
An LPA does not expire until the donor dies. Once the person has passed away, the powers of the attorney immediately cease and the OPG should be notified.
While the facilities are available for you to produce an LPA online yourself, we would always recommend seeking legal advice to complete this important document. Only by visiting an experienced legal advisor will you be aware of:
If the LPA is not completed correctly or is rendered invalid, this can lead to delays and significant expense in making the alterations or in applying to the Court of Protection for a Deputyship.
If a member of your family or a friend has an LPA in place and you are named as an attorney, we can assist you with compassion and understanding. We know this will be a difficult and confusing time for you and so we can help explain the steps you should take, including:
Similarly, if a friend or family member is in need of assistance with their affairs and has not set up an LPA, we can assist them with setting up LPAs if appropriate or we can support you during the application process to the Court of Protection for a Deputyship.
Whether you are an individual looking to put your affairs in order with an LPA or you are an attorney with questions about your responsibilities we are here to help. Contact a member of the Private Client team today to discuss your situation.