What is a Power of Attorney?

A Power of Attorney is a legal document which delegates authority to individuals known as attorneys to make decisions on your behalf.

What are the types of Power of Attorney?

There are three main types of Power of Attorney which can be granted in England and Wales.

1. General Power of Attorney (GPA)

These are documents that authorise an attorney to deal with either all your property and financial matters, or more usually a specific transaction or matter, on your behalf. A GPA is usually used in transactions where you are not able to be physically present to sign documents. It cannot be used if you lose mental capacity.

1. Enduring Power of Attorney (EPA)

It is no longer possible to make an EPA, however any EPAs that were correctly made before 1 October 2007 are still valid. An EPA gives the attorneys authority to manage your property and financial affairs and will continue to work after you lose mental capacity.

1. Lasting Power of Attorney (LPA)

LPAs have replaced EPAs since 1 October 2007. There are two different types which allow you to appoint attorneys to either manage your property and financial affairs or your health and welfare. LPAs continue to work after you lose mental capacity.

Who can make an LPA?

In order to make an LPA, you must be over 18 and have mental capacity. It should be noted that there is no requirement to be able to physically sign or make a mark on the document. In this case, you can direct someone to sign on your behalf in your presence with two witnesses.

Sadly, a loss of mental capacity can strike unexpectedly.  This means that it is important not to delay putting in place your LPAs as there is then a risk you may not have the mental capacity to complete them. There is a specific legal test for mental capacity, but the types of things someone should be able to understand when making an LPA are:

• what the LPA is,
• why they want to make one,
• who they are appointing as attorneys,
• why they have chosen these people, and
• the nature and scope of the powers they are giving to their attorneys.

If someone does not have mental capacity, then they are not able to make an LPA and instead an application to the Court of Protection for a Deputyship may be needed.

The Court of Protection can appoint someone, known as a Deputy, to make decisions on behalf of someone who lacks mental capacity. Although Deputies can be appointed for both property and finances and personal welfare in the same way as for LPAs, in practice it is more unusual to have a Deputyship for personal welfare.

When making an LPA you have the power to choose who you want as attorneys and can include binding instructions to ensure that your attorneys act in the way you would want and non-binding preferences to help guide their decision making. With a deputyship, the Deputy will be appointed by the Court and will not necessarily be the person you would have wanted or be given the powers you would have chosen. The application process is considerably more time consuming than making an LPA, and there are then reporting obligations on your Deputy.

What does an LPA allow attorneys to do?

LPAs for Health and Welfare (LPA HW) allow your attorneys to make decisions about your health and welfare which might include decisions about your daily routine, medical care and where you live in circumstances where you are unable to make such decisions yourself due to incapacity. It can also include the power for your attorneys to make life sustaining treatment decisions.

For LPAs for Property and Financial Affairs (LPA PF) your attorneys will be able to make decisions about all your property and financial matters. This can include paying your bills, collecting your income and selling your house.

You can include preferences and instructions in the documents to guide your attorneys, however it is important to be careful when drafting these, so you do not unduly restrict your attorneys.

Who can I appoint as an attorney for an LPA?

Attorneys must be 18 or over, and for an LPA PF the attorney cannot be bankrupt or subject to a debt relief order. Otherwise, you have almost complete flexibility over who you choose to appoint as an attorney. You should consider appointing people you trust, and from a practical point, they should be people you think will work well together.

Attorneys do not need to be related to you, so you might consider appointing a professional if you have complicated financial or family circumstances. Trust Corporations, such as B P Collins Trust Corporation Limited, can be appointed for the LPA PF.

When can an EPA or LPA be used?

LPAs for Health and Welfare can only be used once you have lost mental capacity.

For LPAs for Property and Financial Affairs you can choose for the document to either be useable only once you have lost capacity, or while you retain capacity but only with your consent.

In both cases, the LPAs must be registered with the Office of the Public Guardian before they can be used.

EPAs can be used without being registered; however the attorneys have a duty to register the EPA at the Office of the Public Guardian once the person who made it starts to lose mental capacity and there is a specific notification process which must be followed.

Lucy Wood, wills, trust and probate partner at B P Collins, explains the key differences between an Enduring Power of Attorney (EPA) and Lasting Power of Attorney (LPA) and advises on any further action a donor – the person who is making one – or attorney may need to take, to avoid being caught out in the future.

“Up until 1^st October 2007, Enduring Powers of Attorney (EPA) could be made, which enabled a donor to choose someone who they trusted, to look after their financial and property affairs, if they lost capacity.  EPAs still remain valid today. However, they do not cover health and welfare decisions, which is why, in 2005, two different types of Lasting Powers of Attorney (LPAs) were introduced – property and financial LPAs and health and welfare LPAs. Therefore, if a donor made an EPA but would now like to choose someone to make care decisions on their behalf should they lose the ability to do so, they would need to make a new health and welfare LPA.”

“After an EPA was signed, it could be used immediately. Registration with the Office of the Public Guardian (OPG) was, and still is, only required once the donor loses capacity. However, not only does the registration of an old-style EPA require a minimum of three family members to be notified, it also takes 8-10 weeks to register – or longer if a family member objects – once the application is submitted. This could be quite a stressful process for an attorney at an already anxious time, particularly if they are caring for the donor.”

“Whereas, an LPA must be registered with the OPG before it can be used. Although this can also take 8-10 weeks, it may be at a less difficult time as the donor still has full capacity. Also, if the donor begins to lose the ability to make their own decisions, there is no need to notify family members or the OPG, if the LPA has already been registered.”

“It is vital that anybody looking to create an LPA or register an EPA, should seek expert legal advice before doing so. While many people might consider the task too time consuming or expensive, it would be wise to think seriously about the security the power might provide you with. If a loved one loses capacity and a power of attorney is not in place, an application to the Court will need to be made for someone to be appointed as a deputy. B P Collins can assist with all applications to ensure they are executed efficiently and correctly.”

What does an LPA mean for my Will?

Both your Will and LPA are important documents and are completely separate from one another. Your attorneys under your LPA cannot make a Will for you or change your existing Will.

If you know someone who has lost capacity without putting a Will in place it is possible to make an application to the Court of Protection for a Statutory Will. However, this process is longer and more complicated than simply making a Will yourself, so where possible we recommend that you put a Will in place now, and review it every five years or on a change in familial or financial circumstances.

What happens if you don’t have an EPA or LPA and lose mental capacity?

If you lose mental capacity without an EPA or LPA in place and someone needs to manage your finances, then they will need to make an application to the Court of Protection for a Deputyship. A Deputy will be appointed by the Court and will not necessarily be the person you would have wanted or be given the powers you would have chosen. The process is time consuming, and the Deputy also has reporting obligations.

We would always recommend putting an LPA in place before you think it is necessary, but if you know someone who needs a Deputyship our team are happy to guide you through the process.

Below are five things that could happen if you lose capacity to make your own decisions and don’t have a Lasting Power of Attorney.

1. Without a property and financial affairs lasting power of attorney, no one will be able to access your finances and your bank accounts would be frozen.
2. An application would have to be made to court to grant the appropriate authority to a deputy, but for those who end up in this situation, this is a time-consuming and lengthy process.
3. In the meantime, important bills could end up going unpaid.
4. Without a health and welfare deputy, it would fall to your medical providers to make decisions rather than making your own wishes clear in advance with your chosen deputy, who could communicate these on your behalf.
5. The court can be reluctant to appoint a health and welfare attorney, so for most of those who have not appointed an attorney for health and welfare, only their medical providers will be in a position to make decisions for them.

B P Collins can advise you on the implications and process of appointing an attorney and we can help draft the documents for you to ensure that all your wishes are clear and legally binding.

When is a business LPA needed?

If a business owner is incapacitated, then close family members and colleagues may not have an automatic right to step in and make business decisions on their behalf. This could result in bank accounts being frozen, loans by banks being called in and overdraft facilities ceasing.

The starting point is to look at how the business is structured to decide whether a business LPA is needed.

Sole trader

Business LPAs are particularly useful for sole traders. It is likely that a sole trader’s business is not a separate entity from the business owner. This means if the business owner is incapacitated, no one will have an automatic right to step in and run the business.

Partnership

If the business consists of partners, then there may already be a partnership agreement in place. It is important to review the agreement and see whether suitable provision for incapacity has already been made.

If there is no provision for incapacity, or the provision is inadequate the partners may wish to update their partnership agreement or create a compatible Business LPA alongside the agreement.

It is important for a member of a partnership to have an LPA in place to ensure they have someone to represent their interests.

Companies

The starting point is to check the articles of association and any shareholders’ agreement to understand what provisions are in place if a director is incapacitated. If there is no such provision, or inadequate provision, it is sensible to seek legal advice with a view to amending the articles of association and/or shareholders’ agreement. Our corporate team can assist with this.

Whilst a director is unable to delegate their decision-making capabilities, if that director is also a shareholder, especially if they are the sole or major shareholder, they should have a Business LPA in place to help ensure business continuity.

The attorney appointed on behalf of a shareholder cannot run the company, however, if the incapacitated shareholder has voting rights in respect of matters affecting the company, such as the appointment or removal of directors, those can be exercised by the attorney.

What happens if there is no Business LPA in place?

If any of the aforementioned business scenarios apply then in the absence of a Business LPA (or well drafted articles of association/partnership agreement) an application to the Court of Protection to appoint a Deputy may be required.

The application for Deputyship is expensive, takes several months and is likely to be financially detrimental to the business – throughout this period no one may have the legal authority to make day to day business decisions.

Lasting Powers of Attorney – Why use a solicitor?

Lasting Powers of Attorney (LPAs) are important documents that can confer considerable powers to your attorneys. LPAs for health and welfare can cover decisions, after you have lost mental capacity, ranging from where you might live and your daily routine through to life sustaining treatment decisions. LPAs for property and finances can cover a wide range of financial decisions, such as managing your bank accounts or selling your home.

Although it is possible to draft LPAs yourself, given the significance of the documents, it is important to get them right. We would recommend using a solicitor to help guide you through the process and make sure that the finished document does what you intended. Our private client team can assist with the making and registration of LPAs, including the following common areas of confusion:

• How to appoint attorneys

An LPA can appoint both primary and replacement attorneys. Where the LPA appoints more than one attorney to act at the same time, a decision needs to be made about how they are to act: either jointly or jointly and severally. We can discuss the options and explain the implications for each type of appointment to make sure that your wishes translate into the document.

• Preference and instructions

LPAs can include preferences, which are non-binding wishes, and instructions, which are binding on attorneys. We can advise on any specific instructions that need to be included for your individual circumstances. It is important to be careful when drafting preferences and instructions as overly complicated or poorly drafted preferences and instructions can make the LPA difficult to use.

• Signing

LPAs must be registered before they can be used, and registration takes around 15 weeks. However, LPAs have to be signed in a specific order. If they are not signed in the correct order, they can be rejected from registration by the Office of the Public Guardian. The error would then need to be corrected, which may cause a significant delay to the registration process. This could have a serious impact if the person making the LPA is losing their mental capacity. We can ensure that the document is correctly signed before submission to the Office of the Public Guardian to make the registration process as smooth as possible.

• Certificate provider

A certificate provider is required to sign the LPA to confirm that the person making it understands what they are doing and that no one is forcing them to do it. While you do not have to use a professional as a certificate provider, we have knowledge of the correct legal test for mental capacity which can help to demonstrate that the LPA has been correctly completed. We can also identify situations where a medical professional would be best placed to act.

• Business LPAs

It is possible to make more than one LPA for property and finances. This is particularly useful for dealing with businesses. We can advise whether a business LPA is needed, and can liaise with our corporate team to make sure that your business can continue to flourish if you lose mental capacity.

How can a lawyer help?

1.     Although LPAs can be created without one, a lawyer can fully explain the pros and cons and what an LPA means for the donor.

2.     They can make sure that the donor has capacity to understand the process and that there is no undue influence involved in the making of the LPA.

3.     Lawyers are good sounding boards when the client is deciding who to appoint and how they can act.

4.     Lawyers can add an extra safeguard by storing the LPA until needed, as it is a live document once registered with the Office of Public Guardian.

5.     Lawyers can be appointed as attorneys too, in more complex situations.

6.     All advice can be conducted over a video or phone call to help you create an LPA.

Benefits of creating a Lasting Power of Attorney

NHS research has shown that one in 14 people over 65 are living with dementia. This increases dramatically to one in 6 for those over 80 years of age. The NHS estimate that in just four years’ time, there will be more than 1 million people living with dementia in the UK.

The Alzheimer’s Society encourages maintaining a healthy and active lifestyle to reduce the risk of dementia, measures which is supported by the BMJ after research found there is a strong link between good heart health and a lower risk of dementia in later life.

However, the number of people living with dementia is still increasing because people are living longer, so it may be prudent to plan ahead and think about who could look after your affairs if you lose the capacity to do so. One way of doing this is through Lasting Powers of Attorney, which allow you to choose someone who you trust, to act on your behalf and make financial or welfare decisions for you.

Lucy Wood, wills, trusts and probate partner at B P Collins, offers a reminder of the benefits of creating Lasting Powers of Attorney (LPA), which allows you to choose someone who you trust, to act on your behalf and make financial or welfare decisions if you are unable to do so.

“Lasting Powers of Attorney (LPAs), which allow someone to make financial or welfare decisions on your behalf when you are no longer able to do so, should not be written off. They can really work where there is a trustworthy relationship.”

“If you lose capacity to manage your own affairs, by developing dementia for example, and you do not have an LPA (or an Enduring Power of Attorney) in place, someone will need to obtain a Court of Protection Order (COPO) to be appointed as your “Deputy” (the Court of Protection’s version of an attorney). The person appointed as Deputy might not be the incapacitated person’s first choice, in fact they could be someone with no family connections at all.”

“The Deputy application is a long and expensive process, there will also be ongoing fees paid to the Court, for example the annual insurance bond, and there are extensive reporting obligations to the Court on an ongoing basis.”

“The Deputy can only do what they have applied for under the COPO and may need to apply to court again for other decisions, so the process is more rigid, and it can take much longer for decisions to be reached.”

“It may work in some situations, but can add stress and burden on the Deputy, which could be avoided by creating an LPA.”

Online services

The Office of the Public Guardian launched a ‘Use a Lasting Power of Attorney’ tool in July 2020, which has been developed to assist those acting as an attorney to get in touch with organisations like banks and healthcare providers more easily. It replaces the current paper-based process, which can hold things up.

Critically, the new tool supports existing checks, including confirming whether someone has the legal right to act as an attorney and the powers they’re eligible for, which helps to protect the elderly and vulnerable from exploitation from a lasting power of attorney. The new system can viewed at https://www.gov.uk/government/organisations/office-of-the-public-guardian

Fee refund scheme for existing Powers of Attorney

If you already have a Power of Attorney in place, the Ministry of Justice has launched a refund scheme for excessive fees paid for lasting power of attorney (LPA) and enduring power of attorney (EPA) applications made between 1 April 2013 and 31 March 2017.

From 1 February 2018, those who applied to register a LPA or EPA during the qualifying period are able to apply for a partial refund on the fees paid to the Office of the Public Guardian (OPG).

The scheme has been launched in response to the OPG’s operating costs coming down during this period, as more people applied to register a power of attorney. At the time, however, the fees were not reduced to reflect this.

B P Collins solicitor Thomas Bird comments:

“Following the reduction in the cost of the LPA registration fee last year, it is welcomed that those who registered their LPAs prior to the price change are now entitled to claim back some of the fees that were incurred.

“Claims can be made using the online service. Full guidance is also available on the OPG website.

“If you would like to contact us in order to discuss your existing LPA or about the process of making a new LPA, then please do not hesitate to get in touch.”

If you are thinking about putting in place an LPA or making or reviewing your Will, or are considering registering an EPA or making an application for a Statutory Will or Deputyship on behalf of a loved one our team are here to help. Please contact enquiries@bpcollins.co.uk or call 01753 889995.