Lasting Powers of Attorney offer an enormous advantage to those who ultimately need them and too many of us will need them for too many different reasons. They are an invaluable and flexible tool that can be tailored to suit most people’s circumstances.
For context, there are currently three different types of Power of Attorney: General, Enduring and Lasting. The Enduring Power of Attorney (EPA) was replaced in 2007 with the Lasting Power of Attorney (LPA) however those EPAs that were created or executed before 2007 remain valid and can still be used and registered today. A LPA is the modern successor to the EPA and there are two distinct varieties, one is to deal with financial and property decisions while the other deals with health and care. An general power of attorney, unlike the EPA and LPA, is terminated when the donor (whoever is delegating powers) loses mental capacity.
To briefly consider what happens when someone loses capacity in the absence of a LPA, imagine an elderly relative without either LPA or an EPA. Assuming that they pay for gas, electric, water and the like, what happens when they cannot pay their bills or the utility company bumps up their prices? Well, that is between that vulnerable relative and their supplier in theory. Next of kin will have no input because (just as it suited us when we were wild teenagers) our parents, siblings and family have no input on the contracts we make with third parties – privity of contract. Similarly, while the bank may have ample funds held for that relative, next of kin have no standing and by virtue of having lost capacity, that relative cannot access those funds even if they have lucid moments where they could spend them.
So, what happens in these circumstances? Well, never fear, the local authority is here. It is not possible to make an LPA after someone loses capacity. The relatively inexpensive LPA route is now closed. Instead, a relative would have to follow the much longer and more costly route of applying to the Court of Protection for a deputyship order. This will take considerably longer, months, and cost thousands of pounds to see through. Where a vulnerable individual is left without a suitable person to deputise, then the local authority or a Court of Protection panel deputy may apply instead. However, this will leave the next of kin on the outside and without any legal authority; they may volunteer opinions, but their input will only be advisory.
It is easier and cheaper to have a LPA in place before anyone needs it. It is far better to have named someone you trust, and to have delegated authority to use on your behalf when you cannot make decisions for yourself, than to have a stranger calling the shots.
Also, considering the far more common circumstances where age has taken a toll on the body but not necessarily the mind. What about when Nan wants to go to the bank but physically can’t? It is a far more common, perhaps even universal occurrence, that we find ourselves fully compos mentis and sharp as a tack, but that walk from the car park to the bank seems more like a mountain trek than an easy dawdle. In these circumstances, then you could open a joint bank account with Nan – and many families will do this, however when Nan passes that joint account will become the property of the other joint owner – automatically. This is often an unintended and unforeseen problem. If however Nan had a LPA for finances and property matters, then while she is fully aware of what she wants to happen, she could ask her attorney to visit the bank on her behalf, speak and deal with the bank on her behalf, and report back to her. She need not have lost capacity; she can draft the LPA so that it can be used on registration, and attorneys will always be held accountable and to strict standards – they must act in the donor’s best interests and consult with the donor whenever and wherever possible.
It should be noted, the health and care LPA cannot be used until the donor has lost capacity. Also, no attorney can overrule a donor with capacity. No one can be bundled off to a home by their children under a LPA against their wishes.
While an individual is fully mobile and compos mentis it may seem that there is no need for a LPA. But this is the time to create one. A loss of capacity will outright stop a LPA being made, and mobility can wane all too readily.
If you would like to find out more about LPAs, please contact any member of our Wealth Management and Taxation team on 01494 521301 or at ashley.minott@allanjanes.com