Officially naming someone to have the power to take care of your financial affairs if you suffer an incapacitating illness or injury will allow a your business to function more normally in your absence and save substantial legal fees.
Deborah Pardoe, CEO of charity Allied Services Trust explains why having a designated attorney is vital.
What exactly is a lasting power of attorney (LPA)?
In England and Wales a LPA is a legal document that lets you (the donor) choose trusted people (attorneys) to make financial decisions or health and care decisions on your behalf.
There are two types of LPA: Property and financial affairs and health and welfare. Most people make both types of document to provide full coverage to support them in various circumstances. Both must be registered with the Office of the Public Guardian (OPG) before they can be used.
There are comparable systems in Scotland and Northern Ireland.
When can LPA be used?
A LPA can only be used after it is registered. The two documents work slightly differently and cover different areas of our life as follows:
Property and financial affairs
The donor can choose to allow attorneys to help before mental capacity is lost or the donor can specify the attorney can only help when mental capacity is lost. This document covers management of investments, income, paying of bills, applying for benefits, purchase and sale of property.
Most people choose the first option because it is the most practical, as we may never lose mental capacity but we may become mentally or physically frail and need help.
It is important to remember while we have mental capacity our attorneys can only act with our consent. If later we lose mental capacity, they can continue to act on our behalf following the instructions in the document.
Health and welfare
This document can only be used once mental capacity is lost. The donor can give authority for the attorneys to give or refuse consent to life-sustaining treatment. The health and welfare document also covers care packages, living arrangements and treatments.
Many people mistakenly believe next of kin have an automatic legal platform to speak to the medical profession in these situations. They do not. While opinions will be obtained from the next of kin the decision will rest with the clinicians.
What are the consequences if someone is incapacitated and they haven’t got a LPA in place?
If you lose mental capacity, you are at risk of losing control of your business because a court will likely appoint a fee-charging professional, known as a deputy, to run your affairs. If you have income, savings and/or property an application to the Court of Protection (COP) will be required.
This costs a lot of money for the application to be prepared if a professional is engaged. In addition, there are court fee with ongoing annual general management fees which all add up to thousands in comparison to the one-off LPA registration fee.
If I’m in a partnership or company can’t my spouse, business associate or directors simply manage in my place?
No. Nobody has an automatic legal right to manage another’s affairs including a business. Whether you are a business owner, director, partner or sole trader safeguarding and providing continuity for the future of your business makes sense should anything happen to you.
In these cases consideration should be given to making a LPA for property and financial affairs for your personal finances and a separate document for your business interests.
Isn’t this a huge amount of power to be handing over to someone?
Yes, it is. That is why is it so important to appoint the right people to help you.
People have the misconception that by making a power of attorney you are giving away control – in fact, the opposite is true. By preparing in advance of vulnerability and incapacity donors are able to detail who they want to help them, how they want to be helped and when.
The documents are legally binding and attorneys must follow the instructions within the document. In addition, the OPG will take action against attorneys who do not act in accordance to the donors instruction or who are in breach of the Mental Capacity Act.
What is the process for setting it up?
Forms are available online from the OPG or by phoning 0300 456 0300. Please read the guidance to ensure the document is correctly drafted to support individual requirements.
The LPA documents need to be:
- Signed by the donor and a witness
- Signed by a certificate provider
- Signed by the appointed attorneys and a witness
- Submitted to the OPG for registration.
If the donor is unsure or does not feel confident in making the document themselves then the services of a professional can be engaged at a cost.
How much does it cost?
If you draft the document yourself there is no fee. If a professional is required a fee of about £500 a document would be commonplace.
As a registered charity, Allied Services Trust offers a drafting service at £123.60 a document with additional charitable reductions for those on low income and benefits.
In addition to a possible drafting fee there is a registration fee payable to the OPG this fee is £82 a document.
However, it is possible for that cost to be reduced or exempted if the donor has a proven income of below £12,000 or certain benefits.
This can be really helpful if, for example, a spouse is on a low income in comparison to their partner who has an income more than £12,000.
This registration fee is to cover the process of checking the LPA is valid and workable and places the attorneys on the central register.
Who should I appoint as my attorney?
You should only appoint someone who you trust and someone who has the right skill set to help you. Your husband, wife, partner, son or daughter or a friend can act. There is no upper limit on the number of attorneys but it must be workable.
It is also possible to have replacement attorneys to be waiting in the wings should something happen to an original attorney.
Attorneys must be over 18 and have mental capacity. For property and financial affairs, LPA attorneys must not be bankrupt or subject to a debt relief order.
You can appoint a professional but they are likely to charge for their services as an attorney.
Why doesn’t everyone have a LPA?
Many people have never heard of LPAs or don’t understand just how important these documents are and what the consequences can be of not having a document in place.
There is increasing evidence people have been caught out by not having LPA in place and need the COP to appoint someone to have legal authority to act on their behalf.