Why LPAs are useful

The loss of capacity, whether temporary or permanent, can cause considerable difficulty for those affected both directly and indirectly.

Assets can be out of reach to even a spouse and children unless they are duly authorised to act.

If one of the holders of a joint account loses capacity – a bank can freeze the account – unless there is a lasting power of attorney in place – until a court order can be obtained.

How an LPA works

A Lasting Power of Attorney (LPA) is the pre-authorisation of a person or people to act on one’s behalf in the event of an individual losing capacity (perhaps going into a coma as a result of an accident or a stroke or losing mental capacity over time through dementia) or, in the case of dealing with their financial affairs, the event that someone simply wants to pass on responsibility to another.

  • An LPA can be ‘tailored’ to the circumstances to reflect the wishes of the person for whom it is being created.
  • The person for whom an LPA is created is described as the ‘donor’ of the LPA.
  • An LPA can only be created by a donor who has mental capacity. If capacity is lost then so is the opportunity to create an LPA.
  • The donor can nominate individual or multiple ‘attorneys’. Attorneys are able to act individually – or jointly – or jointly and severally.
  • Reserve attorneys can be nominated to become attorneys should the principal attorney(s) be unable to act.
  • Attorneys are obliged by law to act in the best interests of the donor at all times.

The types of LPA

Two separate forms of LPA exist:

  1. Health and Welfare LPAs empower attorneys to deal with matters related to how the donor is looked after, medical treatment, where they reside etc. and can only come into effect once the donor can no longer express their wishes for themselves.

  2. Property and Financial Affairs LPAs empower attorneys to deal with all matters concerning the donor’s finances. This type of LPA can be set up to be used – if the donor wants – while the donor still has mental capacity as well as if and when capacity has been lost.

Applying ‘rules’ and/or ‘guidance’ to an LPA

If they wish, donors can set out rules and/or guidance for the attorney(s) to follow. These might include the rules such as:

  1. The attorney(s) being able to act in respect of the Property and Financial Affairs LPA only if the donor is formally diagnosed as having lost mental capacity. (This restriction has the disadvantage of requiring the attorneys to provide proof that the donor has lost mental capacity. This would prevent the LPA being used if the donor still had mental capacity but had perhaps lost some physical ability or simply wanted the attorney to take some action on their behalf. Many donors prefer not to use this restriction so as to retain greater flexibility in the operation of the LPA.
  2. Putting restrictions on dealing with certain assets.

Guidance might include provisions that:

i)  The attorney(s) are recommended to take such professional legal/financial advice as they consider appropriate, with the costs of such being allowable against the assets of the donor

ii)  Suggest a particular investment strategy and/or specify from whom guidance on financial matters should be sought.

iii)  Providing for the attorney(s) to be able to make gifts of assets on customary occasions.

The process

Someone like me acts as the official ‘Certificate Provider’ signing the LPA to confirm that in my professional opinion the donor fully understands the effect and implications of his or her decision to create an LPA.

The LPA has to be signed by all of the relevant parties – donor, attorneys and certificate provider – to certify their acceptance of their relevant commitments and responsibilities and the terms on which they can be applied.

For an LPA to be used it has first to be registered at The Office of the Public Guardian (OPG) to whom a fee has to be paid. This process requires the completion of a registration pack to be submitted together with the signed LPA and the registration fee – currently £82  per LPA (this government fee can be reduced if the donor’s income is below a threshold level – currently £12,000 pa – and/or the donor is in receipt of certain state benefits. Providing acceptable proof can be challenging).

The registration process usually takes 2 – 3 months – although it can take longer at ‘peak times’.

Once registered, an LPA cannot be amended and will stand until such time as the donor revokes it and perhaps replaces it with a new version, either of which can be done at any time – so long as the donor still has capacity. A revised LPA would incur the same scale of charges as the initial one.

Contact Paul Beck to arrange an initial conversation with no obligation.