Loss of mental capacity
Making provision for someone to take care of your property and affairs in the event of loss of mental capacity
Like death, the prospect of becoming mentally incapable is not something most of us like to contemplate! What's more, whilst death is inevitable, mental incapacity is not, which perhaps explains why our apathy is even greater when it comes to making Enduring Powers of Attorney (EPAs) than it is in relation to making Wills. However, statistics show that a surprisingly high percentage of people do become mentally incapable of managing their affairs at some time in their lives, whether in old age, in the event of an accident or because of a stroke. In these difficult circumstances, an EPA can prove invaluable.
So, what is an EPA?
It is a document by which you give someone else (an "Attorney") power to act on your behalf in relation to your property and financial affairs (it does not deal with personal welfare or medical decisions). Importantly, and unlike an ordinary power of attorney, it has effect after you become mentally incapable, subject to a registration procedure being followed. In practice this is often the very time when an Attorney is really needed.
What would happen without an EPA?
In the event of mental incapacity you would not be able to choose who would take over the running of your property and financial affairs. It would be necessary for someone to apply to the Court for the appointment of a "Receiver" to take responsibility. This is a much more cumbersome procedure than the registration of an EPA: full details of your family and property must be given together with medical evidence of the mental disorder. Generally, the Court prefers to appoint a sole Receiver whereas it is possible to appoint two or more people to act (either jointly or jointly and severally) as Attorneys under an EPA. It is also true that the Receiver's role is more limited than and supervised to a much greater extent than that of an Attorney under an EPA. The powers of the Receiver are usually limited to spending the person's income; it is generally necessary to seek specific approval from the Court to spend or re-invest capital or, for example, sell assets such as shares or property. The Receiver is also usually required to submit yearly accounts together with bank and building society statements.
Formalities for an EPA
It is vital that the document is in the prescribed form and is correctly signed. Ideally it should be dealt with professionally but the good news is that it is usually a very simple document to prepare. At the time it is made, it is essential that you understand the nature and effect of the document. In the event of mental incapacity or the onset of incapacity, the document must be registered with the Court of Protection in order to continue to be effective. The procedure (which generally takes between six and ten weeks) involves the Attorney giving notice to you and to certain relatives and submitting an application form. Unless objections are raised, registration is usually a fairly trouble-free process and there is no need for financial disclosure or medical evidence.
What will the Attorney under an EPA be able to do?
As mentioned above, the document can only cover your property and finances but within those boundaries it can deal with anything you wish. It is possible therefore to authorise the Attorney to deal with all of your property and financial affairs or to restrict the authority to certain items or aspects, or to impose limits on the scope of the Attorney's powers. (Note that in any event the Attorney's powers to make gifts out of your assets are limited under the general law). It is also possible to appoint different Attorneys to do different things. You can provide for the document to have effect immediately when signed or stipulate that the Attorney's powers only become operative if you become or start becoming mentally incapable. Professional Attorneys may be able to charge for their services.
Choice of Attorney
Attorney(s) must be adult, mentally capable and not bankrupt. Given the wide powers an Attorney can have, it is vital to choose someone you trust.
Changing your mind
Whilst you are still mentally capable, you can cancel an EPA at any time by signing a Deed of Revocation.
July 2006
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