Investments  

Helping clients to understand how LPAs work

  • Explain the different types of LPA
  • Explain how an LPA is set up
  • Identify how restrictions and conditions can feature in an LPA
CPD
Approx.30min
Helping clients to understand how LPAs work
 Credit: Sora Shimazaki via Pexels

Most people appreciate the need to put a will in place to deal with their affairs on death. 

However, the importance of appointing attorneys to deal with matters when a person loses capacity during their lifetime can sometimes be underestimated.  

It is often assumed that, by virtue of their close relationship, family members will be entitled to make medical decisions for their incapacitated loved ones, and to deal with their assets. 

However, this is not the case. The impact of the Covid-19 pandemic has, unfortunately, highlighted the practical difficulties that family members can face when their loved one loses capacity to deal with their affairs, but there is no power of attorney.

A lasting power of attorney (LPA) enables an individual with capacity (the donor) to appoint an attorney (or attorneys) to make decisions for them, in the event that they later become incapacitated. 

The predecessors to LPAs were enduring powers of attorney (EPAs).

EPAs can no longer be made, but those in place before October 2007 may still be used.

It would be wise to review the validity of existing EPAs, and to confirm that they reflect the donor's current wishes.

Unlike LPAs, EPAs do not extend to decisions about the donor's care and medical treatment. Those with existing EPAs may consider putting a health and welfare LPA in place, to sit alongside the EPA. 

There are two types of LPA and each has its own remit. It can make matters practically easier for the attorneys if both types are put in place. For example, they can use the property and financial affairs LPA to meet medical costs incurred under the health and welfare LPA.

Property and financial affairs LPA

This gives the attorney authority to administer the donor's assets, for example insuring, maintaining or selling their house, managing their bank accounts and investment portfolios and paying invoices (including medical costs).

The attorney is unable to make gifts using the donor's funds, except in specific circumstances prescribed by law. 

A property and financial affairs LPA will apply to assets situated in England and Wales. If the donor holds assets in other jurisdictions, legal advice should be taken to determine whether additional documents are required in the relevant jurisdiction.

Health and welfare LPA

This gives the attorney the ability to make decisions about the donor's health and well-being, including where they live, their care arrangements and medical treatments.

The donor can also give the attorney authority to decide whether or not the donor should receive life sustaining treatment.

Decisions in relation to end of life care can alternatively be made by way of an advance decision, which is a separate legal document.  

Difficulties faced without an LPA 

Without an EPA or LPA, family members will not be able to deal with any assets which the incapacitated person holds in their sole name.