In this episode, I have Claire Earwaker Dos Reis from our Wills, Trusts and Estate Administration team with me talking about Lasting Power of Attorney, what they are, and why we need them.
Welcome to the THP Solicitors Podcast. Today I have Claire Earwaker Dos Reis from our Wills, Trusts and Estate Administration team with me talking about Lasting Power of Attorney, what they are, and why we need them.
Right Claire, there are two types of Lasting Power of Attorney aren’t there?
Yes, a Lasting Power of Attorney is a legal document whereby a person, who is (known as ‘The Donor’), can appoint individuals (known as ‘Attorneys’), who can act on their behalf if they are unable to make their own decisions due to, for example, an accident or an illness.
There are two types of Lasting Power of Attorney (LPA). One deals with Property & Financial Affairs and the other type deals with Health & Welfare decisions.
With a Property & Financial LPA, your Attorneys are given authority to act on your behalf in financial matters such as paying bills, managing your bank accounts, selling investments or your house, claiming pensions and benefits etc.
Under a Health & Welfare LPA, the types of decisions your Attorneys can make include things like where you live, the type and quality of care you receive on a day-to-day basis, medicines, or treatment that you should/ shouldn’t receive etc.
The two LPAS do not interact with each other. So, you can’t make a financial decision using a Health & Welfare LPA and you can’t make health decisions using a Property & Finance LPA. They are equally important, and they manage two very different activities.
If you draft either of these LPAs, how do they come into force when you need them?
Firstly, in order to make an LPA you need to have mental capacity, so the document has to be drafted and signed while you are ‘compos mentis’ and you can make your own decisions. Before your Attorneys can act on your behalf your LPA must be registered with the Office of the Public Guardian (OPG), which is a government body that helps people in England & Wales to stay in control of decisions about their health, welfare and finances.
So, your LPA must be registered before it can be used and take effect. It can be registered by the Donor or their Attorneys, at any time after it has been made. Something to bear in mind is that current guidance on the OPG website states that it can take up to 20 weeks to register an LPA, and that’s providing that there are no mistakes. Realistically it can take longer, so it is really important that once you have prepared an LPA that you get it registered as soon as possible.
With regard to the Property & Financial Affairs LPA, you can decide if your wish is for it to come into effect as soon as it is registered so that your Attorneys can start making decisions about your affairs straight away whether you are capable of making your own decisions or not. However, in the case of a Health & Welfare LPA, it is not possible to use it until the Donor has lost mental capacity.
So, if someone made a Health & Welfare LPA when they had capacity, but had lost mental capacity by the time it was registered, would that still be valid?
Yes, as long as they had metal capacity when the document was drawn up, that is the key moment in time.
Can you specify what your Attorneys can or can’t do? Presumably, you have to choose one or more people to act as your Attorneys.
A lot of people avoid preparing LPAs under the mistaken mindset that they are losing or relinquishing control. This isn’t the case at all – LPAs are designed to provide you with the complete opposite and enable you to retain control.
Your Attorneys have to follow the principles of the Mental Capacity Act, following any instructions you have included in the LPA, consider any Donor preferences, and ultimately their role is to help the Donor make their own decisions as much as they can. Where the Donor cannot make their own decisions, the Attorneys must ensure that each and every decision they make is in the Donors best interests. This is the overriding principle when it comes to LPAs.
It is important to consider who you would like to have as your Attorneys. You can choose one or more people – there are lots of different options. If you are appointing more than one person you must decide if they can make decisions independently/separately or only in joint agreement with the other Attorneys, which in the LPA is referred to as ‘jointly’ and ‘severally’.
If you choose for your Attorneys to act jointly it means that all of your Attorneys must agree unanimously on every decision. Or there is the flexibility that some types of decision are made jointly and others types of decisions are made jointly and severally.
You can also nominate people to replace your original Attorneys e.g. first choice and second choice. In terms of who can be appointed as an Attorney, they must be 18 years old or over, have mental capacity themselves, and for property & Financial Affairs LPAs you cannot have an Attorney who is subject to a Debt Relief Order or Bankrupt. So, choosing your Attorneys is really important but there is lots of flexibility relating to how they act, what decisions they make etc.
So, for example, if you did not have a Property & Finance LPA in place, but you were unable to manage your own financial affairs due to the fact you were struggling with capacity, ill, housebound so you couldn’t get to your bank easily and/or couldn’t do internet banking etc what would happen? Can your friends and/or family do all that for you or is that why you need an LPA?
Your relatives and friends do not have any legal authority to act on our behalf even with your permission. An LPA is protection for those helping you out. In today’s modern world where your family and friends might be able to get access to your accounts e.g. online banking, they don’t necessarily have the legal authority to make those transactions on your account.
With an LPA in place, if they were ever challenged by relatives or institutions about their actions they have evidence to show that they are justified in the decisions and transactions they are making. Even when it comes to joint accounts, if one of the joint holders loses capacity that account may be frozen.
If there is no LPA, and financial decisions need to be made on your behalf, the route that you have to take once someone has lost capacity is to go through the Court of Protection and apply for deputyship, which is much more costly and time consuming and will probably delay key decisions as a critical time.
I’d imagine with regards to the Health & Wealth LPA, this is even more crucial if key decisions need to be made regarding care provision, as it may take a long time to sort out without a person getting the support they require?
Yes, absolutely. Your friends and family aren’t going to be able to make key decisions for you at a very critical time. There is this idea that your next of kin can make care and welfare decisions on your behalf but it’s not that straightforward. Whilst their view may be considered, without an LPA, their suggestions do not need to be acted upon by health professionals.
So again, without an LPA an application may have to be sought through the Court of Protection, however, when it comes to health and welfare decisions it is quite rare for a personal welfare deputyship to be granted by the Court.
So again, this shows why is better to prepare your LPA sooner rather than later to provide protection for everyone. It provides protection for you, and it provides protection for your friends and family who can act as your Attorneys.
And you can also use an LPA in a business context, can’t you?
Yes, it’s not uncommon for people to make LPAs for their personal and their business lives.
As a business person, it is important to consider what would happen to the day-to-day running of your business if you were unable to make decisions yourself e.g., you were abroad on holiday, you have an accident, or you have a medical condition that temporarily incapacitates you. Who is going to authorise the payment of bills, sign cheques, service business loans and pay salaries?
Don’t assume that a family member or business colleague will have the legal authority to do that as that sort of assumption could leave your business exposed to risk. An LPA can be a key part of business continuity planning.
Thanks Claire, it sounds like an LPA is just as important as a Will. In fact, in some ways, they could be considered more important as an LPA provides benefits when we are alive and helps our family and loved ones provide support with our finances or care decisions, whilst keeping them protected.
Thank you, I appreciate the time you spent with us today and I hope those listening have enjoyed this podcast. If you have any questions about Lasting Power Of Attorney and wish to contact our Wills, Trusts and Estates team located in Reading and Henley please visit our website www.thpsolicitors.co.uk for more details.