Navigating the complexities of financial and personal matters can be daunting, especially when you're dealing with life-changing situations such as loss of mental capacity. An effective way to mitigate the uncertainty and risks associated with such circumstances is by establishing a lasting power of attorney (LPA).
In the following guide, we provide you with a comprehensive understanding of what an LPA is, why it's important and how to go about choosing the right one to secure both your future and your assets.
A lasting power of attorney (LPA) is a legal document that allows you to appoint one or more persons - known as 'attorneys' - to help you make decisions, or to make decisions on your behalf. There are two main types of LPAs: a health and welfare LPA, which covers your medical care, daily routine and life-sustaining treatment, and a property and financial affairs LPA, which relates to managing your financial affairs such as bank accounts, bills and investments.
You can appoint someone to take on certain aspects of either LPA, both LPAs, or have more than one attorney managing various aspects of each of them. You will need to have your LPAs registered with the Office of Public Guardian, and you should make sure that the people you appoint as attorneys are trustworthy and guaranteed to act in your best interests.
An LPA serves as a safety net for scenarios where you may no longer have the mental capacity to make decisions for yourself and manage your own affairs. It allows you to maintain a certain level of control over what happens to you and your assets and can have substantial implications for asset preservation and succession planning. Furthermore, an LPA simplifies the decision-making process for your family, reducing stress and emotional hardship during difficult times.
Having an LPA in place can provide you with significant peace of mind that someone will be there to manage your affairs, with your best interests in mind, if you are unable to do so.
Choosing the right attorney is critical to making sure you and your family get the outcome you want and need. The attorney will have significant influence over your life and potentially your financial assets. Trust is paramount, as they could be making decisions ranging from healthcare to investment strategies. You should be confident that your attorney will act in your best interests and adhere to any guidelines or wishes you've laid out.
Managing someone's personal and financial affairs can be complex. You should consider the person's capability to handle various tasks and make reasoned decisions, especially if you have a complicated and expansive asset portfolio. Your attorney should not only be savvy about everyday decisions, but should also be competent enough to understand the complexities involved in managing diverse assets.
It's a substantial responsibility to act as someone's attorney, and not everyone will be up for the task. Make sure to have an open and honest discussion with your potential attorney to ensure they are willing to take on these duties, as their commitment is essential.
Geographical proximity to your attorney can be helpful, especially for a health and welfare LPA where immediate decisions might be necessary. Online communication can mitigate some of the issues associated with distance, but local availability is often beneficial.
You should also make sure that your attorney does not have a conflict of interest that could affect their ability to make unbiased decisions for you. For example, if you have a business partner who stands to gain from certain decisions, they may not be the best choice for your property and financial affairs LPA.
You have the option to appoint more than one person as your attorney. If you go down this route, you'll need to decide if they should act jointly or 'jointly and severally’. Acting jointly means they have to agree on every decision, whereas 'jointly and severally' allows them to act independently of each other. This can provide an extra layer of security but can also lead to complications if the attorneys disagree.
We typically recommend appointing attorneys jointly and severally because - with a joint appointment - if an attorney dies or can no longer act, then all of the attorneys can no longer act as they are appointed together. Therefore, the LPA would cease and a new LPA would need to be registered, unless replacement attorneys have been named in the form.
Some legal limitations can apply to who you can appoint, such as the individual needing to be over 18 and mentally capable. Ensure that your choice of attorney meets all legal requirements, avoiding any future complications.
Life is unpredictable, and your first-choice attorney may end up unable to fulfil their role for various reasons. Therefore, it's a wise idea to appoint replacement attorneys to take over if necessary.
While LPAs offer many benefits, they’re not without their limitations. The initial setup can be complex and time-consuming and can take the Office of Public Guardian between 8-10 weeks to register the documents.
If not carefully established, there's also the risk of abuse or misuse by the appointed attorney, so record-keeping of accounts is important to mitigate this. The cost of setting up an LPA may also be a consideration, although this is often outweighed by the security and peace of mind it provides.
To mitigate these issues, you should make sure to seek professional advice from experts in LPA management.
To become an attorney, the individual must be over 18 and possess the mental capacity to make decisions. Mental capacity is assessed on a case-by-case basis, but ultimately, the person should be capable of understanding the implications of their actions and making reasonable decisions.
If you're setting up a property and financial affairs LPA, your attorney cannot be bankrupt or subject to Debt Relief Orders. This is an important consideration as an attorney with financial difficulties could pose a risk to your assets.
The law doesn’t specifically prohibit someone with a criminal record from serving as an attorney. However, you should be aware of their history, especially if the record involves financial mismanagement or dishonesty.
Often people choose close family members or friends as attorneys, but this is not a requirement. The most important factors are trust, capability and the willingness to act in your best interests. Some people prefer the relationship that a professional attorney can offer rather than a personal one to keep it impartial.
Anyone over the age of 18 with the mental capacity to do so can apply for an LPA. High-net-worth individuals may have specific concerns around asset management and preservation, making the choice of an attorney even more critical.
People often associate LPAs with age-related mental decline, but they can be important for anyone at risk of losing mental capacity. This could include those with certain medical conditions, like dementia, or individuals who are at higher risk due to lifestyle factors or occupation. Ultimately, anyone could find themselves incapacitated as a result of an accident or other decline in health.
You do not need to be a UK resident to make a UK LPA, but the LPA is generally only valid in England and Wales, and to some extent in Scotland and Northern Ireland. This is particularly relevant for individuals with international obligations or holdings who may need to consider creating similar arrangements in other jurisdictions.
LPAs and Court of Protection deputyships serve similar purposes, but there are key differences to understand. An LPA is set up in preparation for someone to lose mental capacity, while a Court of Protection deputyship is established afterwards. LPAs generally offer more control and are usually less time-consuming and expensive to set up compared to a deputyship.
The most significant distinction lies in how these arrangements come into being. An LPA is a voluntary arrangement, meaning you choose to set it up yourself while you still have the mental capacity to do so. In contrast, a Court of Protection deputyship is generally set up after someone has lost mental capacity and hasn't made prior arrangements like an LPA.
An LPA usually offers more flexibility than a deputyship. With an LPA, you can appoint multiple attorneys and specify how they can act, giving them either equal responsibility for decisions or the flexibility to act independently. With a deputyship, the Court of Protection generally appoints a single deputy, although multiple deputies are possible in some circumstances.
Deputies are usually subject to ongoing supervision by the Court of Protection and are often required to submit annual reports outlining their actions, which can be time-consuming. In contrast, attorneys under an LPA are not generally subject to the same level of ongoing formal oversight, unless there are concerns about abuse or mismanagement.
LPAs also offer privacy between you and your chosen attorney(s), whereas a Court of Protection deputyship is a matter of public record.
Creating an LPA may seem complicated, but it is a straightforward process when broken down into steps with the help of legal experts. Given its importance in securing your future and managing your estate, it's worth understanding each phase fully.
You shouldn’t attempt to make any important and binding legal decisions without the assistance of a specialist solicitor, as mistakes can be costly and time-consuming. With a solicitor, you can avoid any potential pitfalls and complete the process as efficiently as possible, whilst still meeting your requirements.
Here’s a general idea of the process of applying for and appointing an LPA:
Whilst it's possible to create an LPA yourself, you should consult a solicitor for expert guidance, especially if your financial and personal affairs are complex. The initial consultation will help you understand what type of LPA is best suited for your needs.
You'll need to decide who you wish to act on your behalf should you lose mental capacity. Consider factors like trustworthiness, experience and geographical proximity. If your estate is complex, you may also wish to consult professionals to act as your attorney.
Once you've decided on the type of LPA and your choice of attorney(s), you'll need to complete the necessary legal forms, which will outline the specifics of what powers and responsibilities the attorney will have, and under what circumstances they can act on your behalf.
You'll also need a certificate provider, who is a neutral third party who can attest that you understand what you're doing and that you're not under undue pressure to create an LPA. This can be someone you've known for at least two years or a professional with the relevant expertise, such as a doctor or solicitor.
Both you and your chosen attorney will need to sign the LPA forms. These signatures must be witnessed, adding an extra layer of security to the process. The certificate provider usually acts as a witness; however, additional independent witnesses can also be used.
Before it can be used, the LPA must be registered with the Office of the Public Guardian (OPG). This involves submitting the completed forms along with a registration fee. The waiting period is usually between 8-10 weeks, from submission to registration, if there are no mistakes on the application. This gives time for any objections to be raised.
You can choose to notify specific people (named persons) when you register the LPA. This offers another layer of protection, as it allows these individuals to raise any concerns they may have with the OPG.
Once the LPA is registered, its activation will depend on the type you've chosen. A property and financial affairs LPA can be used immediately with your consent, while a health and welfare LPA can only be used once you've lost the mental capacity to make decisions for yourself.
After the LPA is in place, it's advisable to review it periodically, especially if your circumstances change. Amendments can be made, but these will also need to be registered with the OPG.
Understanding each stage of this process can make it less daunting and ensure that your LPA is set up correctly to meet your specific needs. Given the complexities and long-term implications involved, professional legal guidance, as offered by JMW, can prove invaluable in navigating the process effectively.
Securing a lasting power of attorney is more than just a legal formality; it's a vital tool for achieving peace of mind and financial security. JMW can provide tailored advice, ensuring that your LPA is set up in a way that meets your specific needs and circumstances. The wills, trusts, tax and succession planning team at JMW is here to guide you every step of the way, helping to ensure a secure and prosperous future for you and your loved ones.
Learn more about the process of applying for an LPA from JMW. You can get in touch with us by calling 0345 872 6666, or filling in our online contact form.
