Enabling someone you trust to make decisions for you, or act on your behalf
Lasting powers of attorney (LPAs) enable individuals to take control of decisions that affect them, even in the event that they can’t make those decisions for themselves. Without them, loved ones could be forced to endure a costly and lengthy process to obtain authority to act for an individual who has lost mental capacity and at a time when they need it the most.
An individual can create a Lasting Power of Attorney covering their property and financial affairs and/or a separate health and welfare LPA. It’s possible to appoint the same or different attorneys in respect of each Lasting Power of Attorney, with both versions containing safeguards against possible misuse.
1) When an Individual loses the capacity to manage their own financial affairs.
It’s not hard to imagine the difficulties that could arise where an individual loses the capacity to manage their own financial affairs, and without access to their bank account, pension and investments, family and friends could face an additional burden at an already stressful time.
Lasting Powers of Attorney should be a consideration in all financial planning discussions. Planning for the loss of mental capacity or physical incapacity should sit alongside any planning for ill health or unexpected death.
Commencing from 1 October 2007, it is no longer possible to establish a new enduring power of attorney (EPA) in England and Wales, but those already in existence remain valid.
The attorney would have been given authority to act in respect of the donor’s property and financial affairs as soon as the EPA was created.
At the point the attorney believes the donor is losing their mental capacity, they would apply to the Office of the Public Guardian (OPG) to register the EPA to obtain continuing authority to act.
2) Where the donor has lost mental capacity in the opinion of a medical practitioner
It’s usual for the attorney to be able to make decisions about the donor’s financial affairs as soon as the lasting power of attorney is registered.
Alternatively, the donor can state it will only apply where the donor has lost mental capacity in the opinion of a medical practitioner.
A Health and Welfare Lasting Power Of Attorney covers decisions relating to an individual’s day-to-day well-being and personal welfare. The attorney may only act once the donor lacks mental capacity to make the decision in question. The types of decisions covered might include where the donor lives and decisions concerning medical treatment.
3) The option to provide authority to give or refuse consent for life-sustaining treatment
The donor also has the option to provide their attorney with the authority to give or refuse consent for life-sustaining treatment.
Where no authority is given, treatment will be provided to the donor in their best interests.
Unlike the registration process for an EPA, registration for both types of Last Powers of Attorney takes place upfront and is not dependent on the donor’s mental capacity. An attorney must act in the best interest of the donor, following any instructions and considering the donor’s preferences when making decisions.
They must follow the Mental Capacity Act Code of Practice which establishes the following five key principles:
A person must be assumed to have capacity unless it’s established he or she lacks capacity.
A person isn’t to be treated as unable to make a decision unless all practicable steps to help him or her do so have been taken without success
A person isn’t to be treated as unable to make their own decisions merely because he or she makes an unwise decision.
An act done, or decision made, under the Act for or on behalf of a person who lacks capacity must be done, or made, in his or her best interests
Before the act is done, or the decision is made, regard must be had to whether the purpose for which it’s needed can be as effectively achieved in a way that is less restrictive of the person’s rights and freedom of action
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4) Who can be an attorney for a property and financial affairs LPA
A donor with mild dementia might be provided with the means to purchase items for daily living, but otherwise their financial matters are undertaken by their attorney. The code of practice applies a number of legally binding duties upon attorneys, including the requirement to keep the donor’s money and property separate from their own or anyone else’s.
Anyone aged 18 or over who has mental capacity and isn’t bankrupt may act as an attorney.
A trust corporation can be an attorney for a property and financial affairs lasting power of attorney. In practice, your chosen attorney will be someone you trust such as a spouse, family member or friend, or otherwise professional contacts such as solicitors. You may also have more than one attorney.
5) Things an attorney should or shouldn’t do when making decisions
Where joint attorneys are being appointed, the donor will state whether they act:
– jointly (the attorneys must make all decisions together)
– jointly and severally (the attorneys may make joint decisions or separately)
– jointly for some decisions (for example, the sale of the donor’s property) and jointly and severally in respect of all other decisions.
An optional but useful feature of the lasting power of attorney is the ability to appoint a replacement attorney in the event the original attorney is no longer able to act.
The donor can leave instructions and preferences, but if they don’t, their attorney will be free to make any decisions they feel are correct. Instructions relate to things the attorney should or shouldn’t do when making decisions – not selling the donor’s home, unless a doctor states the donor can no longer live independently, or a particular dietary requirement would be examples.
6) The beliefs and values an attorney has to consider when acting on the donor’s behalf
Preferences relate to the donor’s wishes, beliefs and values they would like their attorney to consider when acting on their behalf. Examples might be ethical investing or living within close proximity of a relative.
The following apply to both forms of Lasting Power of Attorney.
A ‘certificate provider’ must complete a section in the Lasting Power of Attorney form stating that as far as they are aware, the donor has understood the purpose and scope of the Lasting Power of Attorney.
A certificate provider will be an individual aged 18 or over and either someone who has known the donor personally well for at least two years, or someone chosen by the donor on account of their professional skills and expertise (for example, a GP or solicitor).
7) Allowing for any concerns or objections to be raised before Lasting Powers of Attorney are registered
There are restrictions on who may act as a certificate provider – these include attorneys, replacement attorneys, family members and business associates of the donor.
A further safeguard is the option for the donor to choose up to five people to be notified when an application for the Lasting Power of Attorney to be registered is being made.
This allows any concerns or objections to be raised before the Lasting Power of Attorney is registered, which must be done within five weeks from the date on which notice is given. The requirement to obtain a second certificate provider where the donor doesn’t include anyone to be notified has now been removed as part of the Office of the Public Guardian (OPG) review of Lasting Powers of Attorney.
8) Mental Capacity
A person making a Lasting Power of Attorney can have help completing it, but they must have mental capacity when they fill in the forms. Otherwise, those seeking to make decisions on their behalf will need to apply to the Court of Protection for a deputyship order. This can be expensive and time consuming and may require the deputy to submit annual reports detailing the decisions they have made
9) There are strict limits on the type of gifts attorneys can make on the donor’s behalf
Gifts may be made on ‘customary occasions,’ for example, birthdays, marriages and religious holidays, or to any charity to which the donor was accustomed to donating.
Gifts falling outside of these criteria would need to be approved by the Court of Protection. An example would be a gift intended to reduce the donor’s Inheritance Tax liability.
To find out more about Lasting Powers of Attorney, speak to experienced Cardiff-based Estate Planning Adviser Tony Thomas on 07585 592494 or email@example.com