How to integrate LPAs into family wealth planning

Putting in place LPAs also provides an opportunity to actively involve future generations in intergenerational wealth planning early on. This can provide comfort to donors and attorneys alike in terms of having a plan for what would happen in difficult circumstances.

If the donor's adult children, for example, are appointed as attorneys, they will have to sign the LPA and think about what their role and duties will be in a situation where their parent loses capacity. 

Attorneys have a duty to act in the best interests of the donor, and guidance on what they are authorised to do and how they should make decisions is set out in the Code of Practice for the Mental Capacity Act 2005.

This helps to provide certainty for both the donor and the attorneys as to how financial affairs will be managed in these circumstances.  Further guidance is provided by the OPG.  

The wealth preservation benefits of an LPA

From a wealth preservation perspective, LPAs are important for clients seeking to pass on their wealth to future generations.

LPAs allow attorneys to pay bills and interest on loans, for example, which could prevent financial loss to the individual if they were to default on loans or be charged interest on unpaid bills.

Attorneys also have the authority to access investments, and this power can be used to enable the transfer of investments to obtain a higher return, thus financially benefitting the individual and, in turn, the future generations set to inherit their wealth.

A donor can give their attorneys permission to transfer investments into a discretionary management scheme, or for a scheme that the donor put in place before they lost capacity to continue.

This allows the investments of someone who has lost capacity to be managed most effectively, thus helping to preserve and grow the individual's wealth despite the individual not being able to make their own decisions.

If an individual owns business assets, they should think carefully about who would be best placed to manage these for them in the event of an accident or loss of capacity.

Making an LPA can provide an important level of protection.

An individual can have more than one LPA in operation at the same time, and so they can have a separate LPA for a business if necessary.

It might be that an individual would like their family members to manage their personal finances but would prefer for a business partner to manage their business affairs, to ensure that someone with the requisite skills to preserve the business asset as best as possible has authority over this asset.

A donor can also include wording permitting their will to be disclosed to their attorneys.