Why is power of attorney important? It isn’t the most engaging of subjects at first glance, but in my opinion an important one to consider, especially as we get older. Power of attorney gives us the opportunity to choose the right people to care for our health and finances should we be unable to.
There are three different types of power of attorney:
- enduring power of attorney (EPA)
- ordinary power of attorney, and (OPA)
- lasting power of attorney (LPA)
You can set up more than one, and trying to work out which power of attorney you might need may seem a bit confusing, but read on, I’m going to explain each one and hopefully all should become a lot clearer!
What is an enduring power of attorney (EPA)?
An EPA is solely for financial decisions. Only enduring power of attorneys made and signed before 1 October 2007 are still valid – Lasting Power of Attorneys (LPAs) are now used instead. An enduring power of attorney is registered when the donor starts to lose or has lost their mental capacity.
The attorney is responsible for helping with decisions about your (the ‘donor’s) finances. The attorney must still involve you in making decisions whenever possible. Depending on your (the donor’s) instructions when the EPA was set up, the attorney will help manage things like:
- money and bills
- bank and building society accounts
- property and investments
- pensions and benefits
It’s important to note that an EPA deals only with property and financial affairs, not with personal welfare issues.
What is an ordinary power of attorney (OPA)?
An OPA is also solely for financial decisions, and it's ONLY valid while you still have mental capacity.
An OPA can be useful if you need someone to look after your finances temporarily. For instance, because you’re going into hospital or buying a property abroad and need your lawyer or another family member to sign paperwork on your behalf because you are not going to be present. Or it might be that you find it difficult to get to the bank due to physical ill health, and having someone to act on your behalf would make things easier for you.
You can limit the power you give to your attorney – for example, you could allow them to deal with your bank account but not your property.
An OPA is useful in certain situations, but if you want to make a power of attorney in case there comes a time when you lose mental capacity, you need a lasting power of attorney.
Lasting Power of Attorney (LPA)
It’s a good idea to make sure that you have someone who can look after your health and finances in the future should you be unable to do so yourself.
A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf.
This gives you more control over what happens to you if you have an accident or an illness and cannot make your own decisions (if you ‘lack mental capacity’).
Who can make a Lasting Power of Attorney?
In England you must be age 18 or over and have the mental capacity (the ability to make your own decisions) when you make your LPA. You do not need to live in the UK or be a British citizen. (please note that the process is different in Scotland and Northern Ireland).
There are two types of Lasting Power of Attorney:
- health and welfare
- property and financial affairs
You can choose to make one type or both, but be aware that the lasting power of attorney (LPA) ends when the donor dies.
If you're married or in a civil partnership, you may have assumed that your spouse or civil partner would automatically be able to make decisions about your finances or your health and care if there comes a time when you can no longer do so. But without an LPA, your spouse or civil partner doesn't have this authority.
Health and welfare lasting power of attorney
Use a health and welfare LPA to give an attorney the power to make decisions about things like:
your daily routine, for example washing, dressing, eating
medical care
where you live
who you have contact with
what kind of social activities you take part in
life-sustaining treatment
This can only be used when you’re unable to make your own decisions and ceases upon your death. When setting up the LPA, you must decide whether to give your attorney the authority to make decisions about life-saving treatment.
If you lose mental capacity and don’t have this type of LPA in place, any decisions about your health or care will be made by the professionals relevant to your situation, such as your doctor or your local council’s social services department. If appropriate, they must consult your family (or anyone else with an interest in your welfare) when deciding what is in your best interests – but the final decision lies with them.
Property and financial affairs lasting power of attorney
Use this LPA to give an attorney the power to make decisions about money and property for you (unless you limit their authority by including specific instructions when setting it up). For instance:
managing a bank or building society account
paying bills
collecting benefits or a pension
selling your home
arranging repairs to your home
You decide when you want this type of LPA to start. It can be used as soon as it’s registered, with your permission, or it can be if and when you lose mental capacity. You need to choose when setting it up.
Your attorney has to keep your money separate from theirs and keep accounts to show this. You can ask for regular updates on how much money you have and how much has been spent. These updates can also be sent to your solicitor or a family member should you wish.
Appointing attorneys
You can appoint as many attorneys as you like. Please note though, that if you only appoint one attorney, the LPA will be cancelled in the event of their death. This could create issues further down the line if you are no longer able to make decisions yourself due to mental incapacity, because you will not be able to make a new Lasting Power of Attorney at that stage. Therefore, it can be a good idea to appoint more than one attorney, but if you do, you must decide whether they’ll make decisions separately or together. They can make decisions:
- jointly, meaning they must make all decisions together. Attorneys who are appointed jointly must all agree or they cannot make the decision.
- jointly and severally, meaning they can make decisions together or individually, as they choose.
You can also choose to let them make some decisions ‘jointly’, and others ‘jointly and severally’. If a joint attorney dies and the attorneys were able to make any decisions on their own (called acting ‘jointly and severally’), your LPA will remain valid and the Office of the Public Guardian (OPG) will update the LPA accordingly.
Your attorney does not need to live in the UK or be a British citizen, but they do need to be age 18 or over and of course have the mental capacity to make their own decisions. You cannot choose someone who is subject to a Debt Relief Order or someone who is bankrupt if you’re making a lasting power of attorney (LPA) for property and financial affairs.
You could choose a relative, a friend, a professional (for instance, a solicitor), your spouse or partner. You cannot choose a professional care worker, apart from in exceptional circumstances (for instance, if they're your only relative).
When choosing an attorney, think about:
- how well they look after their own affairs (their finances)
- how well you know them
- if you trust them to make decisions in your best interests
- how happy they will be to make decisions for you
Replacement attorneys
When you make your LPA you can nominate other people to replace your attorney or attorneys if at some point they cannot act on your behalf anymore. This is valuable in case someone you've chosen becomes unable to act on your behalf, for example if they die or lose mental capacity themselves.
Do I need to pay my attorney?
Your attorney can claim back out-of-pocket expenses they incur as part of the role – such as travel or postage costs. They can claim these from your money, and they must keep an account of the expenses and any relevant receipts.
A professional attorney, such as a solicitor, will usually charge for their time spent acting as your Attorney. But usually a non-professional attorney (such as a friend or relative) can’t claim for time spent carrying out their duties unless the person who set up the power of attorney (the donor) specified that they should be paid for their time in the instructions part of the LPA form.
Can a Lasting Power of Attorney be cancelled once set up?
You can cancel it at any time while you have mental capacity by writing to your attorney or attorneys and the Office of the Public Guardian and advising them of your decision.
Do I need a solicitor to set up a lasting power of attorney (LPA)?
While you don't have to use a solicitor to create an LPA, it could prevent problems further down the line, especially if you're unsure of the process or your affairs are complex. It's more costly than doing it yourself, but you might find that the reassurance of having professional advice is worth it.
Setting up Lasting Power of Attorney yourself
Below is a guideline on the process for those who prefer to do it themselves:
- Obtain LPA forms and an information pack from the Office of the Public Guardian. You can either download these online or order them by calling +44 0300 456 0300. Alternatively, you can set up an LPA using the online service on GOV.UK.
- Complete and sign the forms. But be careful – mistakes might mean your LPA is rejected and you need to pay a fee later to reapply.
- have your LPA signed by a 'certificate provider' – this is someone who confirms that you understand what the LPA is and that you haven’t been put under any pressure to sign it. The certificate provider must either be someone you've known well for at least 2 years or a professional person, such as a doctor, social worker or solicitor. Certain people aren't allowed to be your certificate provider – including your partner or any other family members.
- register the LPA with the Office of the Public Guardian – you cannot use your LPA until registration is complete, which can take several weeks.
Registering an LPA costs £82 (at the time of writing this article). If you're registering 2 LPAs at the same time – one for financial decisions and one for health and care decisions – you need to pay £82 for each LPA, so £164 in total.
NEVER make changes to the LPA document itself once registered, as it might become invalid.
I hope this has given you some clarity in respect of how to ensure your finances and your health can be cared for should you become mentally incapable to do so yourself in the future. I believe a power of attorney is invaluable in forward planning for those who don’t like to leave anything to chance! The information provided in this article has been taken directly from the NHS UK, HMRC and AgeUK websites at the time of writing.
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Our Principal, Andrea Speed, is a qualified Discretionary Investment Manager specialising in Investment and Risk, Taxation and Trusts, and a qualified Pension Specialist. Andrea is also a Fellow of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII (Level 7) and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels. Along with a Fellowship, Andrea is a CII Chartered Financial Planner.
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This communication is for information purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
21 March 2024