Do I need to make a Power of Attorney?

Clients often ask us about powers of attorney, and whether they need to make one. In this article, Olivia Bowen and Helen Tandy outline the different types of power of attorney documents and suggest steps to make it easier for loved ones or someone you trust to reflect your wishes and make decisions on your behalf.

What is a Lasting Power of Attorney?

A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint one or more people (‘attorneys’) to assist your decision making or to make decisions on your behalf. This might be needed as a result of a serious accident, illness, dementia or simply old age, and gives you more control over what happens to you if you need support or cannot make your own decisions.

The LPA took over from the Enduring Power of Attorney, and there are two different types of LPA that you can set up:

health and welfare
property and financial affairs

Health and welfare LPA

A health and welfare LPA gives an attorney the power to make decisions about things such as:

medical care
moving into a care home
life-sustaining treatment

It can only be used when you are unable to make your own decisions. 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.

A property and financial affairs LPA

A property and financial affairs LPA gives an attorney the power to make decisions about:

managing a bank or building society account
paying bills
collecting benefits or a pension
selling your home

With this type of LPA, you decide when you want it to start. So it can be used as soon as it’s registered, with your permission.

Who should you choose as your attorney?

You should choose someone you trust to be your attorney(s), and you can appoint as many as you wish, selecting whether they can act together or individually. You can also appoint Replacement Attorney(s) in case your first choice cannot act for you.

How do I set up a Lasting Power of Attorney?

You can set up a Lasting Power of Attorney either through your chosen Solicitor, an Online Legal Service or the new Government Online LPA service. This service may not be for everyone, but provides a partly free solution to setting up an LPA, making it more accessible. We always recommend you take professional legal advice.

The Online LPA Service via Gov.uk is free, although the LPA can’t be used unless it has been registered which costs £82 for each registration. Make a lasting power of attorney - GOV.UK

If the donor has income below £12,000 or gets certain benefits they might qualify for a lower fee, or the fee may even be waived. The online tool makes it simpler to create the document, which you then need to print as this needs to be signed and witnessed.

Whether you have completed your LPA through a Solicitor or online, once you have the signed and witnessed the form, you need to send this to the Office of Public Guardian (OPG) where it is checked and notification sent to specific people nominated by you, to allow opportunity for objections. Even if the form has no mistakes it can take up to 20 weeks to complete this process.

The OPG also provides an online account which provides an access code that you can pass to anyone who you’d like to view a summary of the document. You can only use this service for LPAs registered in England or Wales. We’ve launched the new ‘Use a lasting power of attorney’ service. – Office of the Public Guardian (blog.gov.uk)

LPAs and Discretionary Management

A few years ago, the OPG introduced a new rule that wording had to be incorporated into a Power of Attorney if the attorney wished to use a discretionary investment manager to assist in managing financial assets. Although some new LPAs were set up with this wording, many old ones did not include this and so those attorneys were left unable to use, appoint or replace a discretionary manager.

Lawyers have been lobbying the OPG to remove this requirement, due to the potential for it to cause client and attorney detriment. A recent legal assessment determined that attorneys should be able to continue to use or indeed appoint a discretionary manager and the OPG updated its guidance – see page 37 at this link: https://assets.publishing.service.gov.uk/media/6239e3748fa8f540e99d9b77/LP12-Make-and-register-your-lasting-power-of-attorney-a-guide_-_mar22_update.pdf.

However, this guidance doesn’t mean providers have to comply, and indeed some investment companies still insist on the additional wording. As many of our clients use or will wish to use discretionary management, we strongly recommend that anyone setting up a new LPA adds the wording below, to avoid any costly legal difficulties.

Source: LPAs no longer require discretionary investment express provision – The STEP Blog

Recommended wording:

“My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees.”

We also strongly suggest that the following text is added: “I would like my assets to continue to be managed with Environmental, Social and Governance considerations taken into account.”

If in doubt, do ask your adviser, although do note we are not legal experts!

Although having a Power of Attorney in place is likely to be beneficial you are strongly advised to obtain independent legal advice on this matter before proceeding.

If you have an old Enduring Power of Attorney (EPA) – i.e. set up before October 2007 – this can still be used, but you have to send them away to be registered when capacity is lost which can be inconvenient and does not promote a gradual handover. You can replace an EPA with an LPA if you are happy to undertake the administrative work and the cost of doing so.

Powers of Attorney in Scotland and Northern Ireland

It is worth bearing in mind that the rules on Powers of Attorney in Scotland and Northern Ireland differ to those in the rest of the UK. In Scotland there are two main types of Powers of Attorney: Continuing Powers of Attorney and Welfare Powers of Attorney.

A Continuing Power of Attorney (CPA) enables an attorney to deal with the granter’s property and finances. The attorney’s powers may continue after the granter becomes mentally incapable; however, this must be specifically detailed. A CPA must specify exactly what powers the attorney has and as a result careful drafting is required as the attorney cannot do anything that the power of attorney document does not expressly state.

A Welfare Power of Attorney (WPA) allows an attorney to make decisions about a donor’s health and personal welfare. As with a CPA, the powers of the attorney are limited to those expressly stated by the granter in the WPA document.

Further information on Powers of Attorney in Scotland can be found at: https://www.mygov.scot/power-of-attorney