Lasting powers of attorney frequently asked questions

A power of attorney is a legal document where one person (the donor) appoints one or more people (the attorney) to act on behalf of the donor. Powers of attorney can include ‘general powers’ which allow the attorney to do anything that the donor could do, or ‘specific powers’ which limit the power of the attorney(s) to those stated within the power.
There are three types of power of attorney:

1. General Power of Attorney
2. Enduring Power of Attorney (these can no longer be created, although any which were created before 1 October 2007 are still valid)
3. Lasting Power of Attorney (LPA)

There are a number of reasons why someone would want to delegate powers to another person. For example, they may want an attorney to undertake a certain transaction or manage all their financial affairs. A power of attorney can be created to last for a specified period of time or still be valid following mental incapacity of the person creating the power of attorney.

Examples of situations where a power of attorney may be useful could be where:

Your client, or a loved one of your client, is involved in an accident, or is diagnosed/suffers with some form of illness, which means they are no longer mentally capable of making decisions, either temporarily or permanently; or,

Your client has property or assets within the UK and is out of the country either temporarily or permanently. For convenience, an attorney could make financial decisions on their behalf while they are out of the country.

LPAs were introduced by the Mental Capacity Act 2005 and replaced the creation of Enduring Powers of Attorney (EPA) from 1 October 2007. An LPA enables people, while they are still mentally capable, to decide who can deal with their personal affairs after they become incapable of acting and making decisions for themselves.

There are two different types of LPA:

(i) Property and financial affairs powers

This power authorises an attorney to make decisions about the donor’s property and financial affairs when the donor is unable to make decisions themselves. Some examples may include running bank accounts, dealing with investments, life assurance policies and redemption bonds. It is possible to draft this type of power on the basis that it will only come into effect if, or when, the donor lacks capacity to make decisions for themselves. This allows the donor to retain control and the ability to make decisions.

(ii) Personal welfare powers

This power authorises an attorney to make decisions about the donor’s personal health and welfare, but only when the donor lacks capacity and is unable to make the decision in question. The power extends to the attorney making decisions about where the donor may live, who can visit the donor and the type of care the donor requires. This power cannot be used for financial affairs.

All further references within this document to LPAs refer specifically to property and financial affairs powers. You can obtain further information on personal welfare powers from the Office of the Public Guardian (OPG) website.

The documentation to create the LPA is free of charge and can be downloaded from the OPG website. In order for a power to be valid it must be in the form prescribed by the OPG. If it is not, the power could be rejected when it is registered.

The forms changed quite significantly on 1 October 2009, in order to shorten them and simplify the process. The forms have been reduced from 25 pages to 11 pages, although the donor may be required to complete supplementary forms. The use of the new forms became compulsory from 1 October 2009; you are no longer permitted to use the old LPA forms.

The new form is divided into three parts:

Part A – the donor’s statement which includes details of the attorney(s) being appointed and how they are to act, either jointly and/or jointly and severally. If more than one is appointed, this section also needs to include the person or people to be notified when an application to register the power is made, and a signed statement by the donor confirming informed consent of the creation and registration of the power.

Part B – a declaration by an independent certificate provider. The certificate provider confirms that no undue pressure or fraud was involved in the decision to make an LPA and that the donor understands the scope and power.

Part C – the attorney’s statement confirming that they understand the duties and responsibilities as an attorney.

The donor

This is the person creating the power, who must be at least 18 years of age and have full mental capacity at the time of its creation. The donor is responsible for choosing who to appoint as attorney. The donor also states whether there are any restrictions or conditions to the attorney’s appointment.

The attorney

This is generally an individual such as a relative, friend or professional. The attorney must be at least 18 years of age and not be declared bankrupt or subject to an interim bankruptcy order.

Where more than one attorney is appointed, the power will state whether they should act ‘jointly’, which means every attorney must authorise all transactions together, or whether they should act ‘jointly and severally’ where the attorneys can act together or independently of each other. If no direction is given within the power then it is assumed that the attorneys will be appointed ‘jointly’.

It is possible for the donor to appoint a substitute or successor attorney(s) within the power. This is a new concept for powers of attorney and can be useful where an attorney is unable to, or no longer wishes to, continue acting as an attorney. The donor needs to state, when creating the power, the conditions of the substitute/successor attorney’s appointment and when that attorney can act.

Before an attorney can act on behalf of the donor, the LPA must be registered with the OPG.  Registration is confirmed by a Public Guardian stamp on each and every page of the power. Once registered the attorney can act for the donor regardless of whether the donor has full capacity or not, unless there are restrictions or conditions stated within the power which restrict the attorney from acting.

Contrary to popular belief an attorney cannot do whatever they like whenever they like. As well as having to consider any restrictions and conditions which may be specifically stated within the power, an attorney must also follow five principles, as stated within the Mental Capacity Act 2005.

An attorney must:

1. assume that the donor can make their own decisions unless they establish otherwise.
2. help the donor make as many decisions as they can.
3. not treat the donor as being unable to make a decision because the donor has simply made an unwise decision.
4. make decisions and act in the best interest of the donor when the donor is unable to make the decision in question.
5. consider, before making a decision or acting, whether they can make the decision or act in a way that is less restrictive of the donor’s rights and freedom but still achieves the purpose.

These principles are key to the decision-making process and should be considered each time an attorney has to make a decision on behalf of the donor.

An attorney has limited powers to make gifts on behalf of the donor.

The gifts must be on customary occasions, such as birthdays, weddings or civil partnerships, or to charities to which the donor made or might have been expected to make gifts. The value of each gift should not be an unreasonable amount and the attorney should have regard to the circumstances and in particular the size of the donor’s estate.

It is not possible for an attorney to undertake any form of inheritance tax (IHT) planning on behalf of the donor. However, if an attorney believes that this will be in the best interest of the donor, they could apply to the Court of Protection to authorise the transaction. However, if the donor still has capacity it is unlikely that an attorney would want to incur the cost of requesting a Court Order for the transaction. It would therefore be reasonable for the donor to carry out the tax planning or gifting of the asset themselves.

Yes. However, this cannot be achieved by the execution of an LPA.

If the donor is also a trustee and wants to delegate the trusteeship to a third party then this can be achieved, whilst the donor has capacity, by creating a General Trustee Power of Attorney in accordance with the English law Trustee Delegation Act 1999. The trusteeship can be delegated for a period of 12 months at a time from the date of the power. After 12 months a new General Trustee Power of Attorney must be created by the donor, provided they have capacity at that time.

Yes, in accordance with Section 13 Mental Capacity Act 2005 the LPA can be revoked by either the donor or the attorney.

By the donor

This can be done at any time whilst the donor has capacity to do so. The donor must notify the OPG and all of the attorneys of the revocation.

By the attorney

Where there is one attorney, or where two or more attorneys are appointed to act jointly, the power is revoked when one of the attorneys:

(i) disclaims office
(ii) dies
(iii) becomes bankrupt, or
(iv) lacks capacity to act; unless there is a replacement attorney appointed by the donor on the original power.

Where there are two or more attorneys and they are appointed to act ‘jointly or severally’ the power is only revoked in relation to the attorney who disclaims office, dies, becomes bankrupt or lacks capacity.

The LPA can also be revoked on the dissolution or annulment of a marriage or civil partnership between the donor and the attorney, unless the power provides otherwise.