Powers of Attorney
Many of us make plans for death and protecting our loved ones including life insurance, spouse and dependent pensions, trusts and Wills but most of us do not think about or have made no plans if we become unable to look after our affairs.
What is a Power of Attorney (POA)?
A Power of Attorney is a legal document appointing someone to look after your affairs in certain events. This can be for things such as property abroad or in another part of the country or it may be that you are going overseas and need somebody to look after your affairs in this country.
Should I have a Power of Attorney?
We believe everybody should have a Power of Attorney in place just in case you become unable to look after your affairs e.g. you become physically incapacitated or indeed your mental health deteriorates. This may seem extreme and unlikely, but it affects thousands of people every year and is a must for us all. Failure to have this simple appointment letter done could place immense difficulties on your loved ones and even mean going to court to have a person appointed to look after your affairs.
Before moving on, it may be helpful for you to understand the two following terms:
Donor – the person who grants power over their affairs.
Attorney – the person, group of people or company appointed by the donor to look after their affairs.
There are basically two types of Power of Attorney:
- Ordinary Power of Attorney
- Lasting Power of Attorney (formerly an Enduring Power of Attorney).
Contact us today for help with your powers of attorney.
1. Ordinary Power of Attorney
This is a document where you (the donor) appoints another person or persons (attorney) to act on your behalf and with your authority on a given matter. You specify what those powers are, over what property the attorney can have dealings and when the powers are effective such as between certain dates.
For example: To look after your home whilst you are working abroad for a year. The problem with the general Power of Attorney is that if you become mentally incapacitated the appointment ends and your attorney no longer has control.
Ordinary Power of Attorney: Two types: General and Limited
- A General Power of Attorney provides that all powers are given to your attorney without any restriction.
- A Limited Power of Attorney provides precisely defined criteria for activities that the attorney is allowed to do. It can also specify time-scales as to when the powers are effective.
When does an Ordinary Power of Attorney start?
As soon as you sign it and your Attorney signs it.
When does an Ordinary Power of Attorney finish?
It finishes when either
- The donor cancels the powers
- The powers time-scales finish
- The power was specific and the particular transaction is complete
- The donor, or indeed, the attorney, dies or becomes mentally incapacitated
2. Lasting Powers of Attorney
Lasting Powers of Attorney replaced Enduring Powers of Attorney on 1 October2007
Lasting Power of Attorney after 1 October 2007 (replacing enduring powers of attorney)
Lasting power of attorney replaces the older style enduring powers of attorney laws and covers personal welfare issues and financial decisions in addition to all the normal decisions on mental incapacity, which an enduring power of attorney does not.
Any existing enduring power of attorney will continue. If an individual has the capacity to make decisions or has made a qualifying advance decision, then a welfare attorney cannot act on the individual’s behalf. The powers given in a lasting power of attorney cannot be exercised until the document has been registered with the Public Guardian.
For a lasting power of attorney to be valid certain requirements need to be met:
- A donor must be over 18 years of age and not bankrupt
- An attorney must be over 18 years of age and not bankrupt
- Regulations made under the act must be complied with
- A donor and an attorney must state that they have read the prescribed information and the attorney understands their duties
- A certificate from an authorised person is also required, which confirms that the donor understands the lasting power of attorney and that there has been no fraud committed or undue pressure applied.
However, a lasting power of attorney can be revoked if the donor has the capacity. A lasting power of attorney can also be revoked if:
- The donor is bankrupt, but not on the welfare part
- Upon the death of the attorney
- Bankruptcy of the attorney, but excluding the welfare part
- The dissolution of marriage or civil partnership between a donor and an attorney
- Incapacity of the attorney
Enduring Powers of Attorney (EPA) set up before 1 October 2007 are still valid:
An Enduring Power of Attorney (EPA) is the same as an Ordinary Power of Attorney in that it gives the attorney powers to act on behalf of another.
However, an EPA became valid if you became mentally incapacitated provided you had registered the Power of Attorney with the Public Guardianship Office (formerly the Public Trust office).
You could even word the EPA to only become effective upon mental incapacity so that you have complete control over all your assets unless something unfortunate happens i.e. ‘just in case’.
As with the Ordinary Power of Attorney, the EPA could either be a General Power of Attorney or a Limited Power of Attorney. In simple terms, upon mental incapacity, your attorney can either act without restriction or have defined powers.
Enduring Powers of Attorney are more serious with regard to the powers given because these powers continue after mental incapacity at which point the donor may not understand exactly what is happening. Once mental incapacity is present, the Power of Attorney cannot be revoked without intervention by the Court of Protection. Care, therefore, needs to be taken on who is appointed.
When did an Enduring Power of Attorney start?
Even though both the donor and the attorney may have signed it, it is not effective until mental incapacity starts or is suspected of starting and the EPA has been approved and registered with the Public Guardianship Office.
When did an Enduring Power of Attorney finish?
It finished when
- The donor cancels the powers before mental incapacity has set in
- The donor replaces the enduring power of attorney with a lasting power of attorney
- The Court of Protection intervenes
The Mental Incapacity Act
The Mental Incapacity Act 2005 came into force on 1 October 2007 and removed the uncertainty regarding decisions made on behalf of others when they are mentally incapacitated.
The Act made amendments to, updated and replaced the Enduring Power of Attorney (EPA) Act 1985 and has given the Court of Protection more comprehensive powers than before.
The Act also replaced the Enduring Power of Attorney with the Lasting Power of Attorney.
The Act applies only in England and Wales; however there has been a similar Act in Scotland since 2001.
Now applies to Temporary and Permanent Incapacity
The amendments apply to persons with a temporary mental incapacity as well as those who have been mentally incapacitated since birth. Persons over the age of 16 will be affected by the changes.
Other key principles from the Mental Incapacity Act include:
- Individuals will be assumed to have capacity unless it is proved otherwise
- Individuals must be allowed and supported in making their own decisions as far as possible
- Everything that is done on behalf of another person it must be in their best interests, with the least restrictions being applied
- A decision maker must consider making decisions that interfere as little as possible with the rights and freedoms of a person who is incapacitated
- Individuals should not be assumed and therefore treated as lacking incapacity as this could lead to unwise decision-making
3. Court of Protection - Power of Attorney
The court of protection has the overall jurisdiction in all cases of mental incapacity.
The court can make decisions about an individual’s personal welfare and financial matters or they can appoint a deputy to act on their behalf.
A deputy is regarded and treated as an agent of the individual who lacks capacity.
A deputy has similar powers to that of an attorney, however a deputy’s main function is to replace the hands on role of the court protection and public guardianship office.
4. Lack of Mental Capacity
The assessment regarding lack of capability is made at the time a decision in relation to a particular matter needs to be made and is based on the individuals inability to make a decision due to impairment of or disturbance in the functioning of the mind. The lack of capability also includes temporary situations caused by alcohol and drugs.
Decision Making Process
The process applied to the lacking capability procedure is in three stages:
- An individual must be able to understand the information relevant to the decision
- An individual must be able to retain the information long enough for them to make a decision
- An individual must be able to use the information to make a choice
If an individual is unable to perform any one of the three conditions, it indicates that they are unable to make a decision and so another person will have to make it on their behalf.
This is usually an attorney who has a lasting power of attorney, however it can be a court.
5. Attorney Gifts under Lasting Power of Attorney
Where a lasting power of attorney authorises decisions about property and affairs, it does not authorise an attorney to dispose of property by making gifts except:
The done (attorney) may make gifts:
- on customary occasions to persons including himself who are related or connected to donor; or
- to any charity to whom donor made or may have been expected to make gifts
If the value of such gifts is not unreasonable having regard to all circumstances and the size of donor’s estate.
Customary occasion means:
Anniversary of birth, a marriage or formation of civil partnership or any other occasion where presents are customarily given within families or among friends or associates.
This is subject to conditions or restrictions in the instrument (deed).
This is almost identical to the powers under an enduring power of attorney.
6. Getting Started With POA
A. Decide which Power of Attorney you require:
- Ordinary Power of Attorney - General or Limited? or
- Lasting Power of Attorney
B. Decide what powers you wish to give your Attorney.
C. Draft the Document
If using an Ordinary Power of Attorney you can draft this document yourself or obtain professional help from a Solicitor, Financial Adviser or other to help with the wording and ensure it is effective.
If you require a Lasting Power of Attorney you are required to use a specific LPA form available from solicitors, law stationers or the Public Guardianship Office.
D. Signature once happy, the document should be signed by the donor and then the attorney.
7. Who can appoint an Attorney?
In simple terms, anybody who is over the age of the capacity to contract i.e. 18 years.
The donor must not be mentally incapacitated and understand what they are doing when the appointment is made.
Any such document giving power must also be signed by the donor and the attorney before incapacity starts.
You must register a Lasting Power of Attorney with the Public Guardianship Office.
The Public Guardianship office is the administrative arm of the Court of Protection. The functions of the public guardianship office are:
- Maintaining a register of lasting power of attorneys and enduring power of attorneys
- Maintaining a register of deputies
- The supervision of deputies
- Dealing with complaints about attorneys and deputies
When to register the attorney?
If mental incapacity is suspected to have started or has started the Attorney must notify the donor and three relatives of the intention to register the Lasting Power of Attorney.
There is a priority in which the relatives should be notified, these are:
- Donor's spouse
- Donor's children
- Donor's parents
- Donor's brothers/sisters (whole or half blood)
- Widow/widower of the child of a donor
- Donor's grandchildren
- Children of brothers/sisters (whole blood)
- Children of brothers/sisters(half blood)
- Donor's uncles/aunts (whole blood)
- Donor's uncles/aunts (half blood).
The Attorney must then apply to the Public Guardianship Office to register the LPA. There is a fee to register the LPA.
The Public Guardianship Office will either approve the LPA or refer the matter if they are not happy with the circumstances.
9. What if I Have Nobody to Act
Independent Mental Capacity Advocate (IMCA)
This is a new role and is intended to support individuals who lack capability but has no one to speak for him.
An Independent Mental Capacity Advocate can challenge decisions, which have been made by an attorney or deputy.