Briefings
Private Client: Lasting Powers of Attorney - One Year On
Personal
Personal Tax, Trusts and Probate
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| October 2008 |
Lasting Powers of Attorney (LPAs) were introduced on 1 October 2007 and their first birthday is no cause for celebration. Although the thinking behind LPAs is laudable, the practical problems encountered in their first year are a real concern. Created by the Mental Capacity Act 2005, an LPA enables an individual (called the donor) to appoint other people (known as attorneys) to act on their behalf in relation to their property and financial affairs. LPAs replaced the much simpler Enduring Power of Attorney (or EPA) as the only type of power of attorney that can operate after the loss of mental capacity. Although most clients and solicitors regret the loss of EPAs, one positive aspect of the new regime is that for the first time a donor can now appoint an attorney to make decisions about his or her personal welfare.
Property and Affairs LPA
A Property and Affairs LPA allows attorneys to take a wide range of actions on the donor's behalf. These could include buying, selling, or mortgaging property, dealing with investments, and paying bills. It is possible to limit an attorney's powers by specifying that the LPA applies only to certain matters. Alternatively, the LPA can include a general authority to act in relation to all finances and property.
A registered Property and Affairs LPA can be used as an ordinary power of attorney while the donor still has mental capacity (unless the donor specifies otherwise). This can be useful where the donor travels frequently, meaning that the attorney can sign documents on the donor's behalf while he or she is away.
Personal Welfare LPA
A Personal Welfare LPA enables the donor to appoint attorneys to make decisions on his behalf in relation to personal welfare, including healthcare and medical treatment decisions.
For example, a Personal Welfare LPA allows attorneys to make decisions about where the donor should live, consenting to or refusing medical treatment, and day-to-day care including diet and dress. Unlike a Property and Affairs LPA, it can only be used after the donor has lost mental capacity.
Unless restrictions or conditions are added, the attorneys appointed under a Personal Welfare LPA will have authority to make decisions in relation to all personal welfare and healthcare matters. However the attorneys cannot make decisions relating to life sustaining treatment, unless the LPA expressly authorises this.
Completing the form
Unlike the old EPA, a four-page form that was easy to understand and simple to complete, the LPA runs to 30 pages. To complete it properly, one needs to read through extensive explanatory notes and a Code of Practice running to over 300 pages. Government assurances that the LPA forms were designed after extensive public consultation and usability tests so that people could complete them without legal assistance ring hollow.
Completing the form is just the start of a long and drawn out process. An independent third party then needs to sign a "certificate of capacity" confirming that the donor is acting of his own free will and that he understands the purpose of the form and the scope of the authority it gives the attorney.
Registration
To be valid an LPA must be registered with the Court. The registration fee is £150. To avoid future delays or problems when the LPA is needed, it is usually best to register the LPA as soon as it is signed. Registration involves another 30-page form and a process akin to a lottery. Even very minor mistakes - forgetting to tick a box or not including a full address - can invalidate the LPA and lead to a rejected application. The new Public Guardian, Martin John, recently reported that a fifth of applications to register an LPA contained mistakes that rendered the power invalid or prevented registration. That means having to go through the whole process again, including a new fee and further delays, rather than just correcting the mistake.
Notification
Notification of registration is meant to give those who are close to the donor an opportunity to object. Under the new regime the donor can choose who should be notified of the LPA's registration. This is a big change from the old EPA regime, where rules set out prescribed categories of relatives to be notified on registration.
If the donor decides that no-one should be notified then two (rather than one) independent third parties need to provide certificates of capacity when the LPA is signed. To avoid the need for an extra certificate provider, the donor can simply specify one living person to be notified, who can be wholly unconnected with the donor. So if the donor really does not want his family and friends to know that he has entered into an LPA, he could specify that his doctor, lawyer or a total stranger be notified.
Incapacity
A Personal Welfare LPA cannot be used until the donor has lost capacity (and sometimes also a Property and Affairs LPA, if the donor so specifies). But when is that point reached? Under the LPA regime there is not generally a single time when a donor is considered to have lost capacity to make all decisions. Instead the new regime embraces a joint approach where the donor and attorneys work together. The starting assumption is always that the donor has the capacity to make a particular decision unless it can be shown that he lacks capacity. The donor should not be treated as being unable to make a decision unless all practical steps to help him do so have been taken without success. Whether or not the donor is capable of making a particular decision will often depend on the matter in question - a donor may be quite capable of deciding how much to give as a wedding present but not whether to change his investment portfolio.
Which power of attorney?
New EPAs can no longer be created but those signed before 1 October 2007 remain valid. Although a general power of attorney can still be created, it is automatically revoked as soon as the donor loses mental capacity. Therefore, for those without an EPA who wish to appoint an attorney to make decisions on their behalf should they ever become incapable of making decisions for themselves, the only option is an LPA.
The future of LPAs
Following the inauspicious first year of the new LPA regime, Martin John has announced a wide-ranging review of the application process "to make sure solicitors and users can fill the forms out". Wholesale abolition and a return to the much simpler EPA is unlikely.
For more information about appointing an attorney to manage your financial affairs or to make personal welfare decisions on your behalf, or if you would like to receive a copy of our detailed information sheets about LPAs, please contact Andrew Goldstone or Sarah Albury.
IMPORTANT: This newsletter is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.