Financial Planner Will Hodgson expands on his previous Estate Planning article by discussing Lasting Powers of Attorney.
Many people assume that their partner, spouse or even children would be able to step in and manage their affairs should they lose capacity. Sadly, this is not the case; instead, an application to the Court of Protection would be needed and it is ultimately their decision as to who is appointed as a ‘Deputy’. A Deputy’s court-appointed powers will be limited, and applying to the Court of Protection can be a very expensive and time-consuming exercise. In the interim, access to an individual’s assets in any form will be virtually impossible, and liaising with care homes or medical professionals will prove very difficult. This is why Lasting Powers of Attorney (LPA’s) are so important.
My last article discussed the importance of having the right Will and Trust Planning in place; however, no estate package is complete without LPA’s. These are legal documents that allow you (the Donor) to nominate a person or people (the Attorneys) to either help you make decisions or to do so on your behalf. Although you do not need any legal experience to act as someone's Attorney, one has to accept the responsibility that goes with this duty.
LPA’s replaced the Enduring Power of Attorney (EPA), which could only provide powers to Attorneys to deal with the Donor’s property and financial affairs. EPA’s are technically still valid, but often more restrictive than the replacement LPA.There are two types of LPA:
- - Property and Financial Affairs
- - Health and Welfare
The Donor can specify within their LPA if they wish to nominate any replacement Attorneys should their original Attorney be unable to act on their behalf. The Donor can also specify whether Attorneys have the authority to act independently of each other or if they must make decisions together. These decisions include, but are not limited to:
- - Where the donor lives (remaining at home or moving into care, for example).
- - Maintaining or improving the donor’s quality of life.
- - Making decisions regarding medical care.
- - Management of bank accounts, investments and other assets.
- - Claiming State Benefits.
- - Management of household bills.
An Attorney has to act in the best interests of the Donor and, particularly when it comes to any investments, is responsible for seeking appropriate advice when making any decisions. LPA documents cannot be used until they are registered with the Office of the Public Guardian (OPG). A Property and Financial Affairs LPA can be registered and used at any point (with the Donor’s permission). This means that it can be used to act on behalf of someone who has not yet lost capacity; for example, someone with mobility issues or who is not comfortable managing their own finances.
Let us revisit Michael and Sarah from my previous article: they are married and each have an adult child from a previous marriage – Bradley (Michael’s son) and Lucy (Sarah’s daughter). Michael is sadly diagnosed with Dementia and decisions need to be made on his behalf as to whether he will enter a care home. Michael did not have LPA’s in place and this leads to a dispute between Bradley and Sarah as to who should be responsible for making any decisions. Whilst Michael might have intended for Sarah to make all decisions jointly with Bradley, there is nothing to enforce this and it will be ultimately up to the Court of Protection who (if either of them) is appointed as Michael’s Deputy. Herein lies the ancillary benefit of the LPA – an individual can clearly express their wishes in a way that is legally enforceable and this can minimise family disputes in the future.
Although LPA’s can be self-drafted, there are hidden potential risks. An incorrectly drafted LPA can create substantial problems down the line, especially if capacity has since been lost. A professional who is able to advise on LPA’s will confirm capacity; discuss the choices faced by the Donor and ensure all paperwork is correctly completed. This is vital as the OPG will be exacting in their requirements and will need to be satisfied that the Donor has not been unduly influenced to make a LPA.
LPA’s are essential to ensure the continued managing of an individual’s affairs and can provide the peace of mind needed in these uncertain times. As these should form part of your wider Estate Planning, it is recommended that you seek independent advice before arranging them.
Will Hodgson BSc(Hons) DipPFS
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