What is a Lasting Power of Attorney?
Lasting Powers of Attorney (LPA) are legal documents that enable you to name a person or persons (your attorney(s)) to take decisions on your behalf in the event that you become incapable of making decisions yourself.
There are two types of LPA. A Property and Financial Affairs LPA allows your attorneys to take decisions on your behalf regarding your assets and finances, including matters such as buying and selling properties, managing your investments, paying your expenses and completing your tax return. A Health and Welfare Decisions LPA gives your attorneys authority to take welfare and healthcare decisions on your behalf, such as where and with whom you live, what you wear and how you spend your day and also to give and refuse consent to medical treatment, including life sustaining treatment.
Why is it important to have one in place?
The absence of a Property and Financial Affairs LPA may be disadvantageous to you and those who rely on you financially, if you lose mental capacity. In effect, your assets are effectively ‘frozen’ and no-one would have immediate authority to deal with them. This also applies to your share of most jointly owned assets, such as your share of your home (or any other property that you own jointly with another person) or an interest in a business or partnership. Without an LPA, someone, most likely a member of your family, would have to make a costly and time consuming application to the Court of Protection to act as your deputy. This procedure can take several months, during which time no-one would be able to manage your assets.
In contrast, if you had signed an LPA then, provided your LPA had been registered, your attorneys could start acting on your behalf immediately.
A Property and Financial Affairs LPA can also be used at any time after it has been registered, even when you still have mental capacity. It is therefore a useful way of ensuring someone else is authorised to handle these matters on your behalf if, for example, you wish to relieve yourself of the burden of decision making or if you travel frequently (so may be uncontactable when a decision needs to be taken).
If you lose capacity to take your own health and welfare decisions, and without a Health and Welfare Decisions LPA, people with whom you may have no direct relationship would have to take these decisions on your behalf, such as medical staff or Social Services. An LPA gives you the opportunity to specify a person (or people) to make these decisions. Ideally, this should be someone who knows your wishes and preferences and will act accordingly.
What happens if you don’t?
In the absence of an LPA, an application would need to be made to the Court of Protection for the appointment of a “deputy” to deal with your property and financial matters (deputyships for healthcare and welfare decisions are rarely granted).
Assuming the Court accepts the application, it will then supervise the deputy on an ongoing basis and will require financial accounts to be kept and submitted. By contrast, the Court does not supervise attorneys to the same extent. Married couples and civil partners in particular often find the Court’s continued involvement intrusive.
A deputyship application takes time to process and cannot be made before the onset of incapacity, which may prove inconvenient and could cause financial loss if the application has to be made at an inopportune time.
For healthcare decisions, you also have the choice of making an Advance Decision. An Advance Decision, which must meet strict requirements if it relates to the refusal of life-sustaining treatment, enables you to identify certain circumstances in which you would not wish to receive certain treatment (including treatment designed to prolong your life) in the event that the circumstances arise and you are incapable of giving or refusing consent at that time.
What power does it give someone else?
As explained above, a Property and Financial Affairs LPA allows your attorney(s) to take decisions on your behalf regarding your assets and finances. You have the choice whether the power is conferred whilst you have capacity or only after you do not.
You may harbour concerns that your selected attorney(s) may not act in your best interests. An attorneyship confers significant responsibility on the chosen attorney. For both types of LPA, you may set out any preferences or instructions you would like your attorneys to take account of. These instructions can either be set out in the LPA or in an accompanying document. With careful drafting, it is possible to restrict the scope of the powers conferred on attorneys and build in additional safeguards. Where appointing two or more attorneys, it is also possible to state that you would like them to act jointly in relation to some matters and to have the choice of acting jointly or independently of each other in relation to other matters.
Ultimately, your attorneys have a duty not to take advantage of the position of attorney, which means that they must act in your best interest. If your attorney undertakes their duties in the course of their profession, they must display a higher level of competence.
In essence, LPAs grant a trusted family member, friend or trusted advisor the ability to assist you when you most urgently need their help, to make decisions concerning your wellbeing and ensure your wishes and preferences are heard when you are unable to voice them yourself.
What issues can people face that have them?
It is essential that your attorney is entirely trustworthy and, in a worst case scenario you hand decision making power to a person who then only seeks to further their own ends. If, however, they do behave, or are likely to behave, against your best interests, the Court has the power to remove them (by terminating the LPA).
With this concern in mind, and for your protection, an attorney cannot be permitted the freedom you have to deal with your own assets. For example:
- Your attorneys will only have limited authority to make gifts of your property on your behalf.
- Your attorney cannot delegate their authority to the same extent that you can (which can lead to some difficulties in relation to the management of investments).
Attorneys can be appointed to act “jointly” (i.e. all together) or “jointly and severally” (i.e. independently). Where attorneys act jointly, your LPA will, unless stated otherwise, terminate if any one of the jointly appointed attorneys cannot act (e.g. if they die or lose capacity themselves).
How do you put one in place?
Once you have selected your attorney(s) you can complete an online form available on the website of the Office of the Public Guardian before registering them. It costs £110 to register and LPA.
An LPA must be signed by the donor, a “certificate provider” and the attorney(s), in a specified order. A donor can also name up to five people to be notified when an application to register the LPA is made. This can allow for the person(s) to make enquiries with the donor and reduce objections and the corresponding delay when the application to register the LPA is made.
However, if you are unsure as to whom to appoint as your attorneys or what powers, provisions or safeguards to include, you should seek specialist legal advice.
This article was written by James Bradford. For more information, please get in contact with James on +44 (0)20 7427 1042 or via James.Bradford@crsblaw.com.
News & Insights
Hugh Gunson and Thomas Klemme write for Trusts and Trustees on cross-border enforcement of tax debts
Dominic Lawrance and Hugh Gunson write for Trusts & Estates Law and Tax Journal on dealing with HMRC enquiries and assessments into domicile
Non-resident CGT changes re UK real estate: the beginning of the end, or the end of the beginning?
Further changes to the taxation of UK real estate have been made, with effect from 6 April 2019.