Lasting Powers of Attorney for Property and Financial Affairs – who would you trust to look after your affairs?
When people talk about ‘getting their financial affairs in order’, most are referring to meeting with their financial advisor to ensure that they have sufficient life insurance in place or seeking advice from their solicitor in relation to making a will to ensure that when they die, their estate is administered by individuals or professionals whom they trust and passes in accordance with their wishes.
However, many people do not consider entering into a Lasting Power of Attorney for Property and Financial Affairs to appoint individuals or professionals whom they trust to look after and make decisions in relation to their financial affairs while they are still alive.
Why do I need a Lasting Power of Attorney for Property and Financial Affairs?
If a person becomes unable to manage and look after their financial affairs due to either physical or mental incapacity, they will look to family, friends or professionals to assist them.
However, there is a limit to the assistance that can be provided by these third parties if there is no formal authority given to them. They usually find that no institution, whether it be a bank, building society, utility company, benefits agency or pension provider will speak with them, release any information to them or take any instructions from them unless they have been formally appointed to act on behalf of the incapacitated person.
This is where the existence of a Lasting Power of Attorney for Property and Financial Affairs is invaluable.
What is a Lasting Power of Attorney and why should I put one in place now?
A Lasting Power of Attorney for Property and Financial Affairs is a legal document which lets you appoint another person or people (your ‘attorneys’) to make decisions on your behalf in relation to your financial, administrative and property affairs.
It can be used to cover periods of physical incapacity (not being able to get to the bank or sign documents). In these cases, the person gives instructions to the attorneys in relation to their financial affairs and the attorneys carry out those instructions.
However, a Lasting Power of Attorney will also cover periods of mental incapacity (where a person may still be able to sign paperwork but cannot make the decisions required or manage their own affairs). In these cases, the attorneys will be able to make decisions on behalf of the person. A Lasting Power of Attorney should therefore be able to be used by the attorneys to look after the person’s affairs indefinitely.
The attorney’s role will include managing and making decisions in relation to:
• bank and building society accounts (including opening and closing accounts, withdrawing and transferring money, setting up direct debits and standing orders and issuing and signing cheques)
• investments (shareholdings, deposit accounts)
• utility bills (gas, electric, telephone, water and council tax)
• pensions (state pension and occupational pensions)
• state benefits
• tax affairs
• selling or renting out property
• setting up payment of care fees
When should I make a Lasting Power of Attorney?
Even if you do not anticipate needing assistance with the management of your financial affairs for many years, it is still very important to consider putting a Lasting Power of Attorney into place as soon as possible.
In order to enter into the document, you must have the mental capacity to understand the Lasting Power of Attorney and the scope of the authority that you are giving to your attorneys. It gives you the opportunity to choose the people who you wish to look after your financial affairs while you are still able to make this decision.
How do I make a Lasting Power of Attorney?
There are two steps:
1. The preparation of the Lasting Power of Attorney (when the document is completed and all people involved sign the form).
2. The registration of the Lasting Power of Attorney (certain people must be notified, and the Lasting Power of Attorney document, an application form and the fee (currently £110) must be sent to the Office of the Public Guardian). The document must be registered before it can be used.
Preparation of the Lasting Power of Attorney – what is involved?
Any person aged eighteen or over can be appointed as an attorney. Most people appoint family members or friends. If there are no family members or friends to act, a professional person can be appointed, for example a solicitor or an accountant.
More than one attorney can be appointed. They can be appointed jointly (where all attorneys must sign all documents) or jointly and severally (where only one attorney would need to sign each document).
Replacement attorneys can be appointed to stand in the event that the original attorney(s) are unable to act (due to death, illness or incapacity).
The attorneys must act in the best interests of the person appointing them and may be called upon by the Office of the Public Guardian to justify their decisions if there is evidence that the attorney is not acting in the best interests of the person.
Restrictions and guidance and the payment of attorneys
It is possible to restrict the type of decisions that an attorney can make by stating this within the Lasting Power of Attorney. It is also possible to specify that the attorney is only to act when the donor lacks the mental capacity to make their own decisions. The person making the Lasting Power of Attorney can also choose to make payment to the people when they act as attorneys (usually only when professionals are appointed).
How is the person making the Lasting Power of Attorney protected?
When the Lasting Power of Attorney document is completed, there are a number of safeguards in place for the person making the document.
People to be notified
The person can specify up to five people they wish to be notified when an application to register the Lasting Power of Attorney is made. People told can raise objections if they are concerned regarding the Lasting Power of Attorney. It the person does not wish to notify anyone, two certificate providers must sign the Lasting Power of Attorney.
The person making the Lasting Power of Attorney must choose a “certificate provider” who is required to confirm that: the person understands the purpose of the document and the scope of authority under it;
no fraud or undue influence has been used to induce the person to create the lasting power of attorney;
there is nothing else which would prevent the lasting power of attorney from being created by the completion of the form (for example, the bankruptcy of an attorney).
The certificate provider must be someone who has known the person for at least two years and as more than an acquaintance, or a professional who has the relevant skills to form the opinion and complete the certificate (for example, a GP or a solicitor).
If people are to be notified, only one certificate provider is required. If no notices are to be given, two certificates providers are required.
Registration of the Lasting Power of Attorney – what is involved?
The Lasting Power of Attorney can be registered at any time after it has been signed. However, it cannot be used until it has been registered and the registration process can take up to three months.
The ‘people to be notified’ are sent a notice which sets out the details of the person making the Lasting Power of Attorney and the attorneys. These people have a specified period of time in which to raise any objections they may have.
The completed Lasting Power of Attorney document, the application form and a fee in the sum of £110 must be sent to the Office of the Public Guardian.
If no objections are received, the Office of the Public Guardian will stamp the document on every page to confirm that registration has taken place.
Can I revoke my Lasting Power of Attorney?
The person making the Lasting Power of Attorney can cancel the document at any time, even after registration, as long as they have the mental capacity to do so.
How do the attorneys go about using the Lasting Power of Attorney?
Once the registered document has been received back from the Office of the Public Guardian, the donor or the attorneys should take a certified copy or office copy of the document to the bank or building society, or send it in the post to the financial institutions and organisations. This will notify them of the existence of the Lasting Power of Attorney and they should then amend the details on the account to show that the attorneys are authorised to act on behalf of the person.
What happens if I do not make a Lasting Power of Attorney?
You can only enter into a Lasting Power of Attorney if you have the required mental capacity to do so. As well as being able to decide upon who you wish to appoint as your attorneys, how they are appointed, whether you wish to notify anybody of your intention to enter into the Lasting Power of Attorney, and who should stand as your certificate provider, you must also be able to fully understand the provisions of the document itself and the scope of the authority which you are giving to your attorneys.
Unfortunately, if you become unable to manage your financial affairs but are also mentally incapable of entering into a Lasting Power of Attorney, an application to the Court of Protection for the appointment of a Deputy to act on your behalf may need to be made.
The family member, friend or professional who wishes to act on your behalf would need to make the application. The Court of Protection has to approve and make the appointment and will only do so if the person is seen to be suitable for the role.
The Court Order appointing the Deputy will also set out the scope of their authority. Non-professional deputies are rarely given unrestricted authority to manage the financial affairs. They will be required to make additional applications to the court to make certain decisions. All deputies also have to provide an annual account showing the income and expenditure made during that period.
Take action now!
As a private client solicitor, I advise all clients to enter into a Lasting Power of Attorney for Property and Financial Affairs, whatever their age. I believe that the document is just as essential and important as a will and life insurance and you never know when it might need to be used.