Lasting powers of attorney are an essential element of many clients’ financial plans – particularly those who are approaching, or beyond, retirement age.
They provide not only peace of mind but a practical tool by which families’ affairs can be secured and managed in the event that clients lose the capacity, or in some cases the inclination, to make their own financial decisions.
Lasting powers of attorney (LPAs) broadly fall into two categories: health and welfare decisions, and property and financial decisions. If the donor (the individual granting the power of attorney) is an owner of a business then it will usually also be appropriate to establish a business LPA, which is a special form of financial LPA.
Any LPA can only be used once it has been registered with the Office of the Public Guardian. The LPA can be registered either by the donor or the attorneys they have appointed.
A financial LPA can be used for some purposes once it has been registered even if the donor still has capacity, unless the donor has specified that the attorneys can only act on their behalf if they lack mental capacity.
A health LPA can only be used when the donor lacks capacity, even if it has already been registered.
The registration process can take around 12 weeks, and many donors choose to register them as soon as they have been signed to avoid any delay if their attorneys need to make decisions following a sudden lack of capacity.
LPAs replaced Enduring Powers of Attorney in October 2007, although EPAs created before that date continue to be effective. EPAs, which can only cover property and financial decisions, differ from LPAs in that they can be used before being registered with the OPG and the attorney is under a duty to register the EPA when they believe the donor has lost or is losing mental capacity.
Mental capacity is at the heart of the LPA system. Donors make LPAs to provide protection against the consequences of losing mental capacity but it is also essential, to prevent abuse, that donors are confirmed to have full mental capacity at the time an LPA is created.
The assessment of mental capacity is, then, vital to the whole process. The principles that govern this are set out in the Mental Capacity Act 2005.
Confirmation of capacity to make an LPA
Lasting powers of attorney must include a certificate provider’s statement confirming that, at the time the LPA is made, the donor understands its purpose and scope, that no fraud or undue pressure is being applied to induce the donor to make an LPA, and that there are no other factors that would prevent the LPA from being created.
The certificate provider must either have known the donor for a minimum of two years or be in possession of the required professional skills. Examples of the latter could include doctors, social workers, solicitors or specialist capacity assessors.