A Power of Attorney allows you to choose someone you trust to make certain decisions or deal with particular matters on your behalf. It can be useful at any stage of life, but it becomes particularly important if illness, an accident or another change in circumstances means you are no longer able to manage your affairs yourself.
Despite this, many people put off making one because they assume a Power of Attorney is only needed in later life or that their spouse or children would automatically be able to step in if necessary.
At AFG Law, our Private Client team regularly advises individuals and families about Powers of Attorney and later-life planning. Below, we answer some of the questions people commonly ask about how they work.
What is a Power of Attorney?
A Power of Attorney is a formal legal document that gives another person the authority to act or make certain decisions on your behalf. The person making the document is known as the donor. The person appointed is known as the attorney.
Depending on the arrangement, you can authorise an attorney to make decisions about your finances, property or health and welfare.
There are different types of Power of Attorney, so it is important to understand which is appropriate for your circumstances.
What are the Different Types of Power of Attorney?
The main arrangements you may encounter are:
- Lasting Powers of Attorney (LPAs).
- An Ordinary Power of Attorney.
- An Enduring Power of Attorney (EPA).
For most people thinking about long term planning today, a Lasting Power of Attorney will be the relevant option.
Lasting Powers of Attorney replaced Enduring Powers of Attorney in October 2007. Existing valid EPAs made before that date can still be used, although no new EPAs can be created.
An Ordinary Power of Attorney is different. It can be useful where you temporarily want another person to manage certain financial matters for you, but it generally cannot continue if you lose mental capacity.
What Are the Two Types of Lasting Power of Attorney (LPA)?
There are two types of LPA.
Property and Financial Affairs LPA
A Property and Financial Affairs LPA allows your attorneys to deal with financial matters. Depending on the authority you give them, this could include:
- Managing your bank account.
- Paying household bills.
- Dealing with savings and investments.
- Managing property.
- Paying care costs.
- Buying or selling property on your behalf.
It can therefore allow someone you trust to manage your financial affairs when necessary.
Health and Welfare LPA
A Health and Welfare LPA deals with decisions about your personal welfare. These could include decisions concerning your care, where you live and certain medical treatment.
Unlike a Property and Financial Affairs LPA, a Health and Welfare LPA can only be used when you lack capacity to make the particular decision yourself
Do I Need a Lasting Power of Attorney If I am Young and Healthy?
A Lasting Power of Attorney is not exclusively for older people. Although Powers of Attorney are an important part of planning for later life, unexpected illness or injury can happen at any age.
Making an LPA while you are well means you decide who should make decisions on your behalf if circumstances change. You must have the necessary mental capacity when making an LPA, so waiting until somebody actually needs help can create difficulties.
What Happens If I Lose Mental Capacity Without an LPA?
Your family does not automatically gain authority to make all your decisions simply because you lose mental capacity. This can cause practical problems. For example, relatives may discover that they cannot simply access your bank account or make certain financial decisions for you.
Where there is no appropriate Power of Attorney, it may be necessary for somebody to apply to the Court of Protection to become a deputy. This process is very different from making a Lasting Power of Attorney yourself. With a Lasting Power of Attorney, you have the opportunity to decide in advance who you trust to act for you.
Can My Spouse Automatically Manage My Finances?
This is not necessarily always the case. Being married or in a civil partnership does not automatically give someone unrestricted authority to manage their partner’s individual financial affairs if that person loses capacity.
For example, there may be difficulties accessing a bank account held solely in your name. In some circumstances, banks will restrict access to joint accounts if there are issues with capacity.
A Lasting Power of Attorney provides formal legal authority for your chosen attorneys to deal with the matters covered by the document.
When Can My Attorney Use My Lasting Power of Attorney?
Before a Lasting Power of Attorney can be used, you must register your LPA with the Office of the Public Guardian. How and when it can then be used depends on the type of LPA.
A Property and Financial Affairs LPA can potentially be used while you still have capacity if you have authorised this. This might be helpful if, for example, you are physically unable to visit the bank or need assistance managing your finances.
A Health and Welfare LPA only becomes relevant to a decision when you cannot make that particular decision yourself.
Does Making a Lasting Power of Attorney Mean I Lose Control?
Absolutely not. Making a Power of Attorney does not mean handing over control of your life. While you have capacity, you remain responsible for your own decisions. Your attorneys must also follow the authority contained within the LPA and comply with their legal responsibilities.
The purpose is to ensure trusted people can assist or act if and when that becomes necessary.
What Responsibilities Does an Attorney Have?
An attorney has significant responsibilities. Among other duties, they must act in your best interests and consider your wishes, feelings and values when making decisions.
An attorney cannot simply treat your money as their own or make decisions based on what benefits them personally. This is why choosing the right attorneys is one of the most important decisions involved in making a Lasting Power of Attorney.
Who Should I Choose as My Attorney?
You should choose someone you trust to make sensible decisions and act responsibly.
This could be:
- Your spouse or partner.
- An adult child.
- Another relative.
- A trusted friend.
- An appropriate professional.
You can appoint more than one attorney and specify how they should make decisions. You should think carefully about practical issues as well as trust. Someone may be a close family member but not necessarily the best person to manage complicated finances.
Can I Tell My Attorneys What I Want Them to Do?
Yes. An LPA can include instructions and preferences about how you would like your attorneys to act. This allows you to provide guidance about matters that are particularly important to you.
However, instructions need to be drafted carefully. Poorly worded provisions can create difficulties or potentially prevent parts of the LPA from operating as intended. Obtaining legal advice can help ensure the document reflects your wishes while remaining workable.
How Much Does It Cost to Register a Lasting Power of Attorney?
There is an Office of the Public Guardian registration fee for each Lasting Power of Attorney. Some people may qualify for a fee reduction or exemption depending on their financial circumstances. For example, qualifying applicants may be entitled to a 50% discount on the registration fee.
The Office of the Public Guardian provides current information about registration fees, reductions and exemptions.
Professional legal fees for preparing a Lasting Power of Attorney are separate from the registration fee.
What Does the Office of the Public Guardian Do?
The Office of the Public Guardian oversees the registration of Powers of Attorney and helps protect people who may lack mental capacity. The Public Guardian also has a safeguarding role in relation to attorneys and deputies.
If concerns arise about the way an attorney is behaving, the Office of the Public Guardian may be able to investigate.
Can I Change My Lasting Power of Attorney Later?
Your circumstances and relationships can change, so it is sensible to review a Lasting Power of Attorney periodically.
Some changes may require you to revoke the existing LPA and make a new one rather than simply altering the original document.
If an attorney dies, loses capacity or is no longer someone you want making decisions for you, the effect will depend on how your LPA was prepared and whether replacement attorneys were appointed. Taking advice can help you determine what needs to be done.
Can an Enduring Power of Attorney Still Be Used?
Potentially, yes. Although you cannot create a new Enduring Power of Attorney (EPA), an EPA validly made before October 2007 may still be effective. An EPA deals with property and financial matters rather than health and welfare.
There are particular rules concerning registration where the donor is becoming or has become mentally incapable, so anyone dealing with an existing EPA should obtain advice about the correct procedure.
When Should I Make a Power of Attorney?
Ideally, a Lasting Power of Attorney should be considered before you actually need one. You might particularly think about making or reviewing an LPA following major life events, when planning for retirement, alongside making a Will, when considering future care arrangements or simply as part of getting your affairs in order.
The key requirement is that you have sufficient mental capacity to create the LPA.
Making one now does not mean you expect to lose capacity. It simply means that if something does happen in the future, you have already decided who you trust to make important financial decisions or welfare decisions for you.
How AFG Law Can Help
At AFG Law, our experienced Private Client solicitors can help you understand the different types of Power of Attorney and decide which arrangements are appropriate for you.
We can prepare your Lasting Power of Attorney, explain the responsibilities placed on your chosen attorneys and assist you with the process required to register your LPA.
Whether you are making an LPA as part of your long term planning, helping a relative organise their affairs or reviewing an existing Enduring Power of Attorney, obtaining advice now can help provide clarity and reassurance for the future.
Contact AFG Law to speak to our Private Client team about putting a Power of Attorney in place.