Powers of Attorney: what are they and why are they so important?
Whilst many people appreciate the importance of having a Will to deal with arrangements on death, the importance of having a Power of Attorney to deal with the position when a person loses capacity during their lifetime is often underestimated.
The COVID-19 pandemic has, unfortunately, highlighted the practical and emotional difficulties family members face when their loved ones have lost capacity to act for themselves, but there is no Power of Attorney in place. Clients may assume that their family members are automatically entitled to make medical decisions and to deal with their assets, but that is not the case.
This dilemma was recently highlighted by television presenter Kate Garraway, whose husband, Derek Draper, has been seriously ill after suffering from COVID-19. Kate has said:
“One of the practical problems – which a lot of people would have experienced if they’ve got the absence of someone in their life – like many things, the car is entirely in Derek’s name, the insurance is in Derek’s name, a lot of our bank accounts. There are lots of financial goings on which are making life very complicated because I can’t get access to things because legally I haven’t got power of attorney.”
Kate has also reported that she has faced difficulties accessing her husband’s medical records without a Power of Attorney.
What is a Power of Attorney?
A Power of Attorney is a legal document put in place when a person (“the donor”) has capacity to make it. The donor appoints an attorney (or attorneys) to make decisions and to act for them, if they lose capacity. This appointment continues beyond the donor’s loss of capacity, which includes both mental and physical capacity.
The predecessors to Lasting Powers of Attorney were Enduring Powers of Attorney (“EPAs”). Since October 2007, EPAs can no longer be made, but those in place before then can still be used, provided that they are valid. It would be prudent to check the validity of existing EPAs to confirm they reflect the donor’s current wishes. EPAs do not extend to decisions in relation to the donor’s health and welfare.
Since 2007, Lasting Powers of Attorney (“LPAs”) can be put in place. There are two types of LPA.
(I) Property and Financial Affairs LPA
This gives the attorney authority to deal with the donor’s property and assets, for example insuring, maintaining or selling their house, access to bank accounts and investment portfolios, paying bills and expenses (including medical expenses). There are legal limitations on the attorney’s ability to make gifts under the LPA.
(ii) Health and Welfare LPA
This gives the attorney authority to make decisions about the donor’s health and well-being, including where they live, their day to day care and medical treatments. The donor can also authorise the attorney decide whether or not the donor should receive life sustaining treatment. Alternatively, decisions in relation to end of life care can be made by an advance decision, which is a separate legal document.
It is not a requirement to complete both LPAs, but it is advisable. For example, it is helpful for the attorneys to be able to use the Property and Financial Affairs LPA to meet medical costs incurred by the attorneys under the Health and Welfare LPA.
What happens if there is no Power of Attorney in place?
Without an EPA or LPA, family members will not be able to deal with the assets of an incapacitated person. The family members will also have less say in the care and medical treatment of their loved one. It is likely that doctors would consult family members about significant medical decisions, but an LPA gives the attorneys greater involvement in the donor’s care.
If someone does not have an EPA or LPA, family members will need to apply to Court of Protection for the grant of a Deputyship Order to give them such authority. This involves instructing solicitors to issue proceedings to apply for the Order. The process can take some time and is a much more costly process than putting an LPA in place.
How does someone make an LPA?
An LPA can be made if the donor has capacity to do so. It is preferable for this to be done when it is clear that the donor has capacity and we encourage clients to make LPAs at the earliest opportunity. Powers of Attorney are not just for elderly clients; loss of capacity can happen as a result of accident or illness.
The process involves the completion of one set of forms for each LPA. There are several aspects which need to be considered, depending on the donor’s personal situation, their wishes and their asset base.
The donor must decide who to appoint as their attorney. This is an important decision because the role of attorney is one of great trust. A donor can appoint more than one attorney, but they should consider whether those attorneys will work effectively together. The donor can appoint different attorneys under each LPA, or the same people.
If the donor appoints more than one attorney, consideration needs to be given to whether they should act jointly (so that they have to make each decision together) or whether they can act jointly and also make decisions individually. The latter option makes the LPA administratively easier for the attorneys to use, but provides less of a “check and balance” on actions being taken by individual attorneys.
Care needs to be taken where attorneys are appointed jointly because if one of the attorneys ceases to be able to act, the LPA will terminate.
Donors need to consider whether to appoint a replacement attorney, to step in in the event that the original attorney cannot act, or is unwilling to do so.
An important practical point to consider is whether the donor holds investment portfolios which are or may in the future be managed on a discretionary basis. The strict legal position is that attorneys cannot delegate decision making about the donor’s assets. This can cause difficulties if the attorneys want to delegate the management of investment portfolios on a discretionary, rather than advisory, basis. The donor and their advisers should consider including a special clause in the LPA which permits delegation in this situation.
The attorneys will not be entitled to see the donor’s Will and the solicitor who prepared it will owe a duty of confidentiality to the donor. If the donor would like the attorney to be able to see their Will before they have died (for example, so the attorney knows not to sell or give away assets specifically gifted under the Will) this consent needs to be included in the LPA.
The donor can include a number of other restrictions, conditions and/or guidance in their LPA. It is very important that these are carefully considered depending on the particular circumstances and drafted so that they do not undermine the effectiveness of the LPA, nor contravene the law which applies to LPAs. The completion of LPA forms is carefully prescribed by the Office of the Public Guardian (“OPG”). It is therefore advisable to seek legal advice when putting LPAs in place.
Once the forms have been completed, they need to be signed in a particular order, prescribed by legislation. First they need to be signed and dated by the donor in the presence of a witness. There are restrictions on who can act as a witness to the signature (for example, the attorney cannot be the witness).
The donor will then need someone to sign the forms as the donor’s “certificate provider” to confirm that the donor has the requisite capacity to make the LPA. This role is usually undertaken by a solicitor or a GP.
The forms then need to be signed and dated by the attorneys (and any replacement attorneys) in the presence of a witness.
Once completed, the forms can be registered with the OPG immediately. This prevents delay if the LPAs need to be used urgently in the future and also helps identify any issues the OPG raises with the forms before the donor loses capacity.
This article first appeared in the Professional Adviser on 20 April 2020.