LASTING POWERS OF ATTORNEY
You may have heard about Lasting Powers of Attorney from the press. They could end up being the most important documents you have, whatever your age.
Making decisions on your behalf
You may have heard the term Powers of Attorney as they are well documented in the media. This could be the most important decision of your – and others’ – lives.
Should you lose your mental capacity to make decisions then unless you have Lasting Powers of Attorney (LPAs) in place any assets you own personally and any assets you own jointly will be frozen to all, including your spouse.
There have been high profile cases in the media of this happening, most recently with TV presenter Kate Garraway.
There are two kinds of LPA, scroll down to find out more about each one and why they are so important.
LPAS EXPLAINED
Often people get confused between their Wills and their Lasting Powers of Attorney. Quite simply, your Will comes into play at your death and your Lasting Powers of Attorney may only be used during your lifetime, should you require any help.
WHAT ARE THEY?
- Lasting Powers of Attorney, to give them their full title, are split into two main categories: Property and Financial Affairs (PFA LPA) and Health and Welfare (HW LPA). There is also the Enduring Power of Attorney, see further below.
- A PFA LPA gives powers to your chosen attorneys to assist you in managing or to take charge of your financial affairs, which can specifically include or exclude your business assets, see below. You may give your attorneys powers to manage your affairs (such as money) immediately if you wish or you can specify that they should only manage your affairs on your behalf once you become incapable of making decisions for yourself e.g. you are diagnosed with an illness such as dementia.
- A HW LPA gives powers to your chosen attorneys to make health and welfare decisions on your behalf, but only once you have become incapable of making those decisions for yourself. This may include life-sustaining decisions (such as Do Not Resuscitate, a DNR), choosing your care package and care home as well as contact with your doctors.
- It is important to realise that setting up Lasting Powers of Attorney does not mean you are giving up your power or authority. Your attorneys are there to assist you whilst you still have capacity to make your own decisions and may only act at your request. They are primarily there to make decisions on your behalf when you are no longer able to make them for yourself and then they can only make decisions in YOUR best interests.
- It is a common myth that LPAs are just for the elderly or those who are ill, but they are essential for everyone. No one ever thinks disaster will strike and hopefully it never will, but anyone can become incapacitated due to an accident such as a road traffic collision or a sporting misadventure, a stroke or through unforeseen illness – something we have seen all too often in our 20 years in business. Unforeseen events are usually immediate, meaning it is too late to put LPAs in place.
WHY HAVE THEM?
- If your assets are frozen due to your vulnerability as a person without mental capacity, the impacts include everything from financial hardship (due to not being able to manage or access accounts and insurance policies) to moving house or managing pensions. The list is endless. Many high-profile figures, for example Kate Garraway, have been in the news after being adversely affected by this.
- Without a Health and Welfare LPA, your spouse, partner or family will not have the final decision on your care arrangements or your health and life-sustaining treatment decisions. This would instead fall to the medical staff and social services.
- LPAs are like an insurance policy in that they are an essential tool in helping families when tragedy strikes, no matter what your age. Similar to an insurance policy, you hope you never have to ‘claim’, but you are glad you have them if ever you need them.
- Another common myth is because you are in a long-term relationship (married or unmarried) you are legally allowed to make decisions on behalf of your partner once they lose their capacity to do so, even with jointly-owned assets. You are not, unless you are a nominated attorney on their LPA.
- If you have not taken the proactive decision to set up PFA LPAs, in order to be involved in your financial affairs, those close to you, such as a family member, would need to petition the Court of Protection which is a long and costly journey with no guarantee of success. The outcome being that that family member is now accountable to the courts for every decision until you have regained your mental capacity.
- However, this court action would not enable that family member to be involved in your health and welfare decisions and these would remain under the control of the medical staff and social services.
What about your Business?
You can also have an LPA for business purposes. You may be happy for your spouse / partner to be involved in personal financial matters, but they may or may not be the best person to manage your company. A business PFA LPA gives you the opportunity to nominate the best attorneys for that role.
Enduring Power of Attorney (EPA)
An EPA was the precursor to LPAs but after the end of October 2007 setting up EPAs was replaced with LPAs. EPAs were for financial affairs only. In theory they are the same as PFA LPAs – trusted persons can act on your behalf should you lose your mental capacity to make decisions. However, there are key differences that can make them operationally very different in practice. Please ask us to discuss the relevance of your existing EPA to your circumstances.
“One could argue that a Lasting Power of Attorney is more important than a Will. As we can’t know if we will lose mental capacity, people often don’t prepare, with disastrous consequences for their loved ones.”
One of our clients wanted to share his experience with you
Steve had always been health conscious – any sort of sport and he was there. He loved his bike and would cycle for miles at the weekend and to and from work.
Despite being road aware and wearing a helmet, one day a driver knocked him from his bike. He suffered a head injury causing mental incapacity which lasted quite some time and he never fully recovered.
In that time, his wife Sara also suffered financial difficulties. When the bank found out about his mental incapacity, they froze his bank account and their joint bank accounts – something they are entitled to do to protect a vulnerable person in Steve’s position.
Her only course of action was to apply to be Steve’s deputy through the Court of Protection. This ended up costing them more than £2,000 in fees and took over three months to complete.
Once granted what’s known as the deputyship, Sara was now accountable to the courts for every decision she made and every penny spent from their joint accounts and Steve’s accounts, until Steve regained his mental capacity.
That meant further court appearances and costs each time. More money, more stress. This could have been avoided if Steve had a Property and Finance Lasting Power of Attorney (PFA LPA), nominating the people he trusted to be his attorneys if required.
Frequently Asked Questions
Why would my joint assets be frozen, that does not seem to make sense?
The authorities and institutions freeze your accounts when they find out that you have lost mental capacity because you are now vulnerable. In theory, whoever you share the joint account with could empty the account without your knowledge or permission. Therefore, to prevent this, the account is frozen, however much hardship this may create for your spouse, partner or family.
I have an Enduring Power of Attorney, so I don’t need a Lasting Power of Attorney, do I?
If the Enduring Power of Attorney (EPA) was correctly signed and witnessed before October 2007, it will be legal and can be used. However, an EPA can only be registered once someone has lost or is losing their mental capacity. Registration and the notification process that accompanies this can take four to five months. Therefore, under those circumstances, as the document can only be used once it has been registered, there can be a gap of four to five months where the attorney(s) cannot act for the estate of the donor (the person who set up the EPA). This can cause financial issues for the donor and those reliant on them. However, a Lasting Power of Attorney (LPA) can be registered as soon as it is set up and therefore be ready for when it is required. Also, an EPA does not cover health and welfare decisions; an LPA does. Many decide to update their EPAs to LPAs because of the latter two points.
What happens to my Lasting Powers of Attorney at my death?
Your LPAs are no longer valid and therefore no longer required after your death. Your Will now comes into play and your nominated Executors and Trustees take over. Often, they are the same people as your attorneys, but they do not have to be. Your LPAs should be returned to the Office of the Public Guardian at your death, for security reasons.
What Happens Now?
“It’s never easy talking about death or possible illness or infirmity, but we gently guide you through this – making sure those you love get what you want them to have.”
Feel free to contact us for an in-depth discussion about your options, our fees, the process or anything else. Just pick up the phone or send us an email. We know from previous client experience that you will be pleased you did.