21 Jun Lasting powers of attorney
What are they and why should we have them?
Research from Direct Line Insurance has found that just 14% of British citizens have lasting powers of attorney (LPAs) and 38% are not aware of them[i].
The survey also revealed that c.80% of British citizens think that if you don’t have an LPA then your loved ones can make decisions on your behalf about medical treatments.
We seem to be much more aware of what a will is for, than an LPA. Having said that, we still see a lot of successful people who don’t have either a will or LPAs in place. This is something we quickly suggest is rectified and although we do not give legal advice, we know how important both can be.
We all know that a will allows you to leave the administration of your estate in an orderly fashion and in the hands of people you can trust, and also gives you the peace of mind that your wishes will be carried out. So why not have a similar document in place to ensure that if you are unable to make decisions relating to your financial affairs and welfare that someone else can make these for you?
The state, through the Court of Protection, has the power to appoint people to manage your affairs, but the procedure can be costly and time-consuming. Also, if you rely on this route you will have lost the right to choose who will have the responsibility for looking after your affairs. There is no guarantee that the court will choose who you would want, just when you may need your affairs dealt with efficiently, and with your wishes taken into consideration.
So, what is an LPA?
LPAs were created by the Mental Capacity Act 2005 (MCA 2005), which covers England and Wales only. Separate types of power of attorney exist for Scotland and Northern Ireland so it’s important to seek the correct legal advice for where you reside and/or have assets.
The Act provides a statutory framework to deal with situations where adults lack the mental capacity to make decisions for themselves, or those who have capacity but want to make preparations for a time when they may lack this in the future.
So why should you have an LPA?
This is best answered by looking at the two different types of LPAs. Property and financial affairs and health and welfare.
Both effectively appoint attorneys to make decisions on your behalf. The attorney, or attorneys, under the first type can make decisions regarding your financial affairs such as dealing with taxes, selling assets, claiming benefits and operating bank accounts. Attorneys under the second type make decisions relating to your care for example nursing care, residential care, refusing or accepting medical treatment.
The property and financial affairs LPA can be used when you lack mental capacity and also while you are mentally capable if you need or would like your attorneys to be able to make these decisions on your behalf, if say perhaps were out of the country for an extended period. This differs from the health and welfare LPA which can only be used if you lack the mental capacity to make your own decisions.
Both are important, but from a financial planning perspective, the property and financial affairs LPA is an essential part of keeping your affairs in order, just like a will. The health and welfare LPA is more of a personal decision but is still important and should ideally be put in place before the likelihood of needing any residential long term care.
You may have heard of or already have an Enduring Power of Attorney (EPA). These applied before 1st October 2007 and enable you to appoint someone to act on your behalf in respect of your financial affairs. EPAs are still valid and in the event of mental incapacity the attorney just needs to register the EPA with the court and act. However, EPAs cannot be used for health and wealth issues so if you already have an EPA it may well be worth seeking legal advice about whether to replace it with the new LPAs.
More information on LPAs can be found on the governments’ website at:
You can complete the paperwork online and can create account to do so at:
However, we suggest that you seek legal advice before applying for LPAs and a good time to do this is when reviewing or obtaining advice about wills. A legal advisor will be able to advise you about LPAs, can act as your certificate provider[ii] and will also be able to advise on the registration process.
We seem all too often to focus on what should happen after we die and forget that we may need our affairs arranged for us whilst we are still alive. An LPA, especially a property and financial affairs LPA, is an integral part of being organised and prepared for the things life throws at us.
[i] Source: Personal Finance Society
[ii] A person who can confirm that you understand the purpose of the LPA, its scope, that no fraud or undue pressure is being used to induce you to create it and there is nothing else that would prevent the LPA from being created.