The Power of Pre-Planning: Lasting Powers of Attorney
When discussing powers of attorney with clients there can be misconceptions that they are documents which are simply required by the older generation who may suffer from dementia or whose ability to manage their affairs can dwindle with old age.
Accidents and medical emergencies can and do happen. A study by Headway showed that in 2016-17 348,453 people in the UK were admitted to hospital with acquired brain injury. This equates to someone every ninety seconds. As the recent COVID pandemic has also shown, a situation may arise where you are incapacitated for a period of time during which you may require assistance managing your affairs. These situations have an extensive impact emotionally and they can present extreme practical difficulties in relation to your day to day living.
In addition to your personal finances, it is necessary to consider whether your business could continue operating if anything happened to you. If, for example, you are a sole trader or the sole signatory on an account and no arrangements are in place, a situation may arise where important business decisions and the settling of supplier invoices and employee wages could not be able to be dealt with for a period of time.
The above examples highlight some of the difficulties that can be eliminated with important and effective lifetime planning, by ensuring that you have lasting powers of attorney (LPAs) in place. In the same way that a will is put in place to ensure your wishes are followed after your death, an LPA enables you to choose who should be in charge of making decisions which affect you at a time when you are not able to.
If you do not have suitable arrangements in place and you lose capacity (whether permanently or for a period of time) it may mean that a Deputyship Order from the Court of Protection is required. Becoming a deputy is an expensive and drawn-out process whereby applicants must complete numerous statutory forms and provide supplementary documentation. The process can take around 6 to 12 months and this delay could leave your personal and financial situation in a precarious position. Whilst family members often apply, depending on family circumstances there may be a disagreement as to who applies which can lead to contested proceedings, protracting the application and leading to additional costs being incurred.
What is a Lasting Power of Attorney?
An LPA is a legal document that enables you, as the donor of the power, to grant, to those of your choosing (your attorneys), the ability to carry out your affairs and make decisions for you. When an LPA is made we, and the Office of the Public Guardian (OPG), recommend that it is registered at the OPG so that it is ready to go in the event it is required. Registration typically takes in the region of 3 months and there is a registration fee of £82 payable to the OPG.
There are two types of LPA and these are considered below.
Finance and Property
A finance and property LPA enables you to grant your attorneys the power to deal with your financial affairs, to include paying bills, selling properties and managing investments and bank accounts. This type of LPA can be used while you have capacity (for example if you were away on holiday or just wanted some assistance), or can be restricted to only be used in cases of loss of capacity.
If you wanted different people to manage your personal affairs to your business affairs, you can apply for two finance LPAs; one dealing with your personal affairs and one for your business affairs. This allows family members to take over tasks such as paying household bills and enables your business partners, who hold the necessary business skills, to continue running the business.
Health and Welfare
A health and welfare LPA enables attorneys to make decisions on your behalf in relation to decisions such as diet, daily routine, medical treatment, and, if you have specified within the form, life sustaining treatment. A health and welfare LPA operates when you have has lost capacity. Most people like to appoint trusted loved ones as their health and welfare attorneys given the importance of medical decisions.
How do I apply for a Lasting Power of Attorney?
Taking into account the above, having an LPA in place is therefore something that we recommend all clients should think about. The benefits are far reaching and having the appropriate arrangements in place ensures your wishes will be honoured if the need arises. At Michelmores, we have extensive experience advising on and preparing LPAs. If you would like further information or help putting LPAs in place for your financial and/or health affairs please contact our tax, trust and succession team.