19 December 2018 | Firm news | Article by Charlotte Fletcher

Lasting Powers of Attorney – The Basics

Martin Lewis, OBE and founder of MoneySavingExpert.com, was recently quoted as saying that he considers making a lasting power of attorney to be “more important than making a will”.

Having both a will and a lasting power of attorney (“LPA”) is extremely important for safeguarding your assets as they account for different eventualities.  A will is only executed once you have passed away. To deal with your affairs during your lifetime, it is essential to have appointed attorneys.

LPAs were introduced by the Mental Capacity Act in 2005 to replace the previous Enduring Powers of Attorney from October 2007. LPAs are legal documents, appointed by a 'donor'. The document permits the attorney, perhaps a trusted friend or relative, to deal with third parties on the donor’s behalf. Their main attribute is that (unlike all other types of powers of attorney) they continue to apply where the person who made them loses mental capacity.

There are two types of LPAs: one to deal with financial decisions and another to deal with health and care decisions. Both types of LPAs are required to be registered at the Office of the Public Guardian before they can be used.

Financial Decisions LPA

Once registered, the financial decisions LPA can be used whilst the donor still has capacity, although only with the donor’s consent. Also, it could be that the financial decisions LPA is required for short term use, such as in situations whereby the donor is unavailable for a period of time (for example while working abroad).

Once the LPA is registered, the appointed attorneys can make decisions about (for example) running bank accounts, buying and selling investments, paying bills, or buying or selling property on the donor’s behalf.

The key issue is that the donor must give their consent for their attorneys to do so, while the donor maintains capacity. It is important to note that, should the donor not wish for their attorneys to make decisions whilst they still have capacity, the LPA for financial decisions would need to specify this.

There are strict rules enforced on the attorneys for financial decisions, such as the requirement to keep up to date accounts and records of any dealings with the donor’s finances. It is also important for the attorneys to ensure the donor’s funds are kept completely separate from their own, and all information must be kept strictly confidential. It is important to refrain from any potential conflict of interest.

Health and care decisions LPA

In contrast to the financial decisions LPA, the health and care decisions LPA can only be used by the attorneys once it has been established that the donor has lost capacity and therefore cannot make such decisions for themselves.

Under the health and care decisions LPA the attorneys are able to make decisions on whether the donor should receive, should not receive, or should stop receiving, particular medical treatment. This also includes the authority to refuse or consent to life sustaining treatment.

This process of registration, and the mental capacity tests referred to in the Mental Capacity Act, ensure that the donor is encouraged to make decisions for themselves, as far as possible. The attorneys should always act on the assumption that the donor is capable of making their own decisions rather than just taking control.

Being appointed as an attorney comes with significant duties and responsibilities, and the attorneys are under a duty to act in the best interests of the donor at all times.

As long as the donor has the capacity, an LPA can be revoked at any time. Furthermore, any person is able to report any misbehaviour or suspicious activity to the Compliance and Regulations Unit of the Office of the Public Guardian, who will immediately take steps to investigate and, if deemed necessary, revoke the LPA.

LPAs are important and can sometimes prove complicated (each form is a 23 page document) so professional advice is always recommended. If you are thinking about appointing an attorney, have been appointed an attorney, considering putting a will in place for the first time, or updating your current will and require advice, please contact the Tax, Trusts and Estates team on 029 22675980.

 

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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