Q: What is a business LPA and why should advisers know about them?
A: Lasting powers of attorney will already be on the radar for most advisers as part of their advice process for clients, but astoundingly, most of them have not actually made sure that their own affairs are in order should they lose their mental capacity.
LPAs are becoming more and more widely discussed within the financial services industry.
With an increasing number of stories in the media about people living longer, and some of the horror stories that are publicised about what can happen if people lose capacity without having LPAs in place, awareness is growing.
Largely, people know they can appoint attorneys to deal with their personal finances, as well as their health and welfare, but a subject less commonly discussed is business LPAs.
Anybody with a business interest, whether that be as a sole trader, a partner or a shareholder, should consider creating a separate LPA solely to deal with their business affairs as part of their business continuity planning.
Without a BLPA in place, if someone with an interest in a business is unavailable – for example, if they regularly spend time out of the country, or they lack mental capacity – it may not be possible to pay staff and suppliers, complete unfinished transactions or enter into new contracts, all of which would be likely to significantly hinder the day-to-day running of the business.
Often in a personal LPA, people will choose to appoint a spouse or family member as their attorney, but they might not be the most suitable person to manage business interests as well.
Business interests are usually more complex than personal affairs and can require specialist knowledge and experience that personal attorneys may not have.
The Mental Capacity Act 2005 Code of Practice governs this area and states that ‘an attorney should be someone who is trustworthy, competent and reliable. They should have the skills and ability to carry out the necessary tasks’.
Naturally, this means careful consideration should be given when appointing an attorney to manage business affairs, to ensure they have the necessary expertise and skills to be able to make decisions in relation to the business in the same way the donor would have done.
Regardless of current health, all business owners should be thinking about their planning for the future. And LPAs should form part of that planning in every case in order to protect both their business and personal finances should the unthinkable happen.
Neil Stevens is joint chief executive of SimplyBiz Group