Lasting Powers of Attorney, and why everyone should have them
We understand that losing your ability to make important decisions about your personal finances and your health may not be a pleasant topic to think about, particularly for the younger generations who may feel the likelihood of them needing provisions in place is extremely low. However, we also understand that nobody is invincible, accidents do happen and contrary to common belief, Lasting Powers of Attorney are most certainly not exclusively for the older generations.
In this article, Joe explains what Lasting Powers of Attorney (LPAs) actually are, who they are for (no prizes for guessing the answer!), who can be party to an LPA and our thoughts on Do-It-Yourself LPAs.
So what is an LPA?
A Lasting Power of Attorney, or LPA for short, is a legal document that simply allows an individual, known as the Donor, to name one or multiple other individuals, known as their Attorney(s), to make decisions for them should they no longer have the capacity to do so themselves. The LPA provides the chosen Attorneys with control over what happens to the Donor’s affairs when they are no longer able to do so, whether that be as a result of old age, serious accident or illness or any other impairment.
There are two separate LPAs, the Property & Financial Affairs LPA, which allows chosen Attorney(s) to make decisions in respect of the Donor’s property, pensions and investments, but also for everyday things like withdrawing cash and paying the bills. The Health & Welfare LPA allows the chosen Attorney(s) to make decisions surrounding the Donor’s medical care and even decisions around life-sustaining treatment, as well as their everyday routine (washing, cleaning etc).
One of the key differences between the two LPAs, aside from the decisions they each allow to be made, is when they can be used. The Property & Financial Affairs LPA can be used immediately once registered, even whilst the donor still has capacity (with the Donor’s agreement), for example if they went away for an extended period of time on holiday and needed bills paying on their behalf whilst they were gone, the LPA could be used. The Health & Care Decisions LPA, however, can only be used once the Donor has lost capacity and is therefore no longer able to make decisions for themselves.
And who are they for?
There is only one answer to this question, and it is a very short one, everyone! It is a common misconception that LPAs are only for the old and infirm, but that is simply not true. Sadly, we can all have a life-changing accident, or suffer from a serious illness that results in us being unable to make important decisions on our own, no matter how significant they may be. I’m sure that most people reading this article can think of at least one person or event where this rings true in their own life?
Whilst the likelihood of needing to use the LPAs increases the older we get, we found through our research prior to writing this article that the likelihood of having a serious accident or illness and surviving with life-changing effects is far greater than actually passing away as a result and so hopefully this stresses the importance of people of all ages and walks of life implementing LPAs for themselves.
Statistics show that we as a population are living longer, which in many respects is fantastic news, who wouldn’t want to live longer? But, for those individuals who suffer from illness or injury at a young age, this is not good news if you do not have someone you know and trust making important decisions on your behalf. Whilst your loved ones can apply to the Court for a Deputyship order, the ongoing costs associated with acting as a Court Appointed Deputy can be stratospheric if they are acting in this role for a number of years or even decades in many cases.
Who are the different parties to an LPA?
There are a number of roles within an LPA, below is a brief summary of what each of them does:
Donor – the person who creates the Lasting Power of Attorney. They must appoint Attorney(s) to act on their behalf in the event that they are no longer able to do so themselves.
Attorney(s) – the person(s) that are appointed by the Donor to make decisions for them under the terms of the LPA.
Replacement Attorney(s) – the person(s) who are tasked with stepping into the shoes of the Attorney(s) if one/a number of them are no longer able, or are unwilling to act in their role anymore.
Someone you wish to notify – the person(s) chosen by the Donor to be notified when the application to register the LPA is made. They have the right to object to the LPA being registered if they have any concerns around the contents or the grounds under which the LPA was initially created.
Certificate Provider – the person who’s responsibility it is to ensure that the Donor and all other parties to the LPA in question fully understand their roles and responsibilities. They must ensure the Donor understands what they are putting in place and the consequences of doing so. It is also the job of the Certificate Provider to ensure that the Donor is under no duress when creating the LPA. This can be someone who has known the Donor personally for at least two years, or more commonly someone who has suitable professional qualifications or experience to act in this role, for example a Financial Planner or Solicitor.
Can you do it yourself?
In short, the answer is yes. But as is the case with any DIY, there are some serious pitfalls and considerations to think about before deciding to go it alone. We would always recommend seeking professional advice when considering implementing LPAs for the following reasons:
By instructing a professional to create LPAs with you, you will ensure that they actually get done, removing you from the perils of procrastination!
- Whilst it is likely to cost you more initially to take advice, this can commonly be something of a false economy when considered against doing nothing at all. If your loved ones are subsequently forced to apply to the Court for a Deputyship, the initial and ongoing costs of doing so can eclipse those initial advice fees (without even touching on the administrative complexities!)
- Another issue that we often come across with DIY Lasting Powers of Attorney documents is one that is often not spotted until it’s too late, typos and errors on the forms themselves. The forms are complex, they come with reams and reams of guidance that can themselves be confusing. In the twelve months the April 2020 alone, the Office of the Public Guardian rejected almost 22,000 LPAs in England & Wales because of errors and typos that they had spotted. What’s more, even if they make it past the OPG’s stringent checks, if the forms are ever needed by your Attorney(s) and are found to have errors on, Banks and other institutions can reject them and at this point, it may be too late to start again!
- One of the more obscure considerations that is commonly overlooked on DIY Lasting Powers of Attorney is having the correct guidance notes on how discretionary-managed investments can be looked after. Legislation surrounding LPAs does not allow for Attorneys to delegate any of their responsibilities to a third party, even if the third party is a professional. Commonly, many individuals delegate the day-to-day management of their pensions and investments to a professional whom they feel are better placed to make the decisions on their behalf. This can, however, cause issues when an LPA is required for that individual, because without specific guidance wording within the Property & Financial Affairs LPA, this delegated responsibility cannot happen and it will then be down to the Attorney(s) to manage the investments on the Donor’s behalf, likely incurring greater a much greater time and cost burden on the Attorney(s).
- There are also enhanced risks of coercion, fraudulent activity and an inherent misunderstanding of how replacement Attorney(s) can act once they are required. The list of potential pitfalls goes on, but I think you get the message.
If you would like any more information about how Lasting Powers of Attorney may benefit you and your family, please do not hesitate to get in touch with us today on 01332 856 373. If, having read this article, you feel you know someone who perhaps should have this planning in place but is putting it off for whatever reason, please provide them with our details, we would love to help.
