Estate planning – Power of Attorney

There are times when, for many reasons, we may want someone to act on our behalf. Although some circumstances wouldn’t need ‘formal authorisation’, for example, asking someone to do some shopping, others, such as having them draw money from our bank account, most certainly would.

There may also be occasions when we lose ‘mental capacity’. Although this could be a temporary situation, perhaps as a result of an injury or an illness from which we eventually recover, it may be something permanent that affects us for the remainder of our life. Either way, if we lose the ability to make decisions and look after ourselves, we have no option other than to rely on the help of those around us.

Losing mental capacity on a permanent basis is most often associated with the tragedy that is dementia, a broad term for a range of neurological conditions that get progressively worse with age. As our life expectancy continues to rise, so does the number affected: a study by Alzheimer’s Society concluded that in 2015 around 815,000 people in the UK were living with the condition. That’s one in every 79 of the total population and one in every 14 of those aged over 65. It’s a very real issue.

Although illness or injury may trigger a sudden, unexpected loss of mental capacity, the onset of dementia and its symptoms are progressive. As the condition tightens its grip the person afflicted loses their memory, their cognitive abilities and their power of communication. What starts as perhaps unremarkable, isolated incidents become worse and more frequent until eventually they lose the ability to look after themselves.

Sadly, although there’s no cure for the condition, its progressive nature means that those suffering the condition do have an opportunity to make provision for their future, and an essential part of that is to appoint someone who will make decisions: someone who has ‘power of attorney’.

Power of Attorney

There are two general categories of power of attorney: ‘ordinary’ and ‘lasting’, the principal difference between the two being the donor’s mental capacity. This is assessed by a healthcare professional, the process usually being triggered by a concerned relative, friend or healthcare worker asking the person’s GP to see them. Most GPs use a series of simple questions to make an initial assessment but may refer the person to a specialist for either a more specialised or clinical assessment or for treatment to try to slow the degenerative process.

Ordinary Power of Attorney

Ordinary Power of Attorney means giving your authority to someone to make financial decisions on your behalf – but it is only valid while you have mental capacity. You can give someone Ordinary Power of Attorney to allow them to:

• act on your behalf for a temporary period of time
• draw cash from your bank account if you are unable to do so
• act for you while they are under your supervision

Giving someone Ordinary Power of Attorney can be useful if, for example, you are housebound, in hospital or on an a lengthy period of overseas travel, as it allows someone you trust to do things for you because of your incapacity or absence. You can revoke Ordinary Power of Attorney when you recover or return.

However, the most important thing to remember is that Ordinary Power of Attorney is only valid while you, the donor, have mental capacity.

Lasting Power of Attorney (LPA)

If you believe there may come a time when you will lose your mental capacity you need to think about granting Lasting Power of Attorney to someone. Cruelly, although you need to have mental capacity to appoint your attorneys, Lasting Power of Attorney recognises that you will eventually lose it. When that happens, your attorney, or attorneys, will have the power you have granted them to make decisions on your behalf. It’s a brave step to make.

Lasting Power of Attorney was created under the Mental Capacity Act 2005 (MCA 2005), the new system superseding Enduring Power of Attorney (EPA) on 1 October 2007. The MCA 2005 provides a statutory framework to empower and protect vulnerable people who are unable to make their own decisions. It makes clear exactly who can make decisions, under what circumstances and goes on to provide detailed guidance in a Code of Practice about how those decisions should be made.

A failing of the Enduring Power of Attorney system was that the attorney’s powers were principally concerned with ‘money and property’ and largely ignored a person’s ‘medical and welfare’ situation, areas where equally life-changing decisions might have to be made. Recognising this, the MCA 2005 created two specific types of Lasting Power of Attorney:

1. Lasting Power of Attorney (Property and Financial Affairs)
This covers:

• managing a bank or building society account
• paying bills
• collecting benefits or a pension
• selling property

2. Lasting Power of Attorney (Health and Welfare)
This covers:

• moving into a care home
• medical care
• daily routine, eg: washing, dressing and eating
• life-sustaining medical treatment

Although Lasting Power of Attorney replaced Enduring Power of Attorney on 1 October 2007, an Enduring Power of Attorney set up before this date should still be valid. However, it must be noted that its scope will cover only property and financial affairs, not health and welfare, so it may be either necessary, or desirable, to take out Lasting Power of Attorney (Health & Welfare) to cover this.

Creating Lasting Power of Attorney

Applying to grant Lasting Power of Attorney is done via the Office of the Public Guardian (OPG), an executive agency of the Ministry of Justice. The OPG was set up in 2007 under the MCA 2005, replacing the Public Guardianship Office which had a limited range of responsibilities. The OPG is headed by the Public Guardian whose principal role is to protect those who lack mental capacity.

Although it is possible to apply directly to the Office of the Public Guardian, the paperwork involved can be complicated. Given that Lasting Power of Attorney effectively gives someone total control of your future; that you may not be able to change or revoke the appointment and the potential consequences of getting it wrong, it is strongly recommended that you engage a suitably qualified solicitor to guide you through the process.

Lasting Power of Attorney (Property & Financial Affairs) and Lasting Power of Attorney (Health & Welfare) are separate authorities and cannot be combined, you have to apply for them individually. It is quite usual for a donor to ask different people to perform the two roles, perhaps appointing a trusted financial adviser and a relative for property and financial affairs, and a spouse, child or close relative for the more personal health and welfare decisions that may need to be made.

The cost of applying for Lasting Power of Attorney is £82 if done directly via the Office of the Public Guardian; so, applying for both property and financial affairs and health and welfare LPAs will cost £164. The OPG’s current fees date back to 1 April 2017 (Office of the Public Guardian: LPA and EPA fees).

Changing or ending Lasting Power of Attorney

Lasting Power of Attorney automatically ends the moment you die and, from that point onwards, your estate becomes the responsibility of your executors. It means that those you appointed as attorneys cannot influence what happens to your estate.

Providing you have mental capacity you can amend or revoke your Lasting Power of Attorney to take into consideration changes in your circumstances. Other events may cause the appointment of your attorneys to end, these being if they:

• lose their own mental capacity
• divorce you or end your civil partnership
• become bankrupt or subject to a Debt Relief Order
• are removed by the Court of Protection
• die

Further information

As Lasting Power of Attorney is administered by the Office of the Public Guardian, an executive agency of the Ministry of Justice, further information can be found on the Government’s website at www.gov.uk/power-of-attorney

Regional variations

There are regional variations in Scotland and Northern Ireland; links to the relevant websites appear on the Government website.

 
How can One Financial Solutions help you?

‘Hope for the best but plan for the worst’ is a common maxim – but many of us just ‘hope for the best’ and then don’t do any planning at all.

One Financial Solutions is here to help you. As a firm of independent financial advisers we can provide impartial advice to help you identify the potential risks you face and develop a strategy that provides protection from their consequences. We’ll recommend the best products from across the whole of the financial services market and help put in place the safeguards you need to protect both you and your dependants.

We can also provide a comprehensive estate planning service to complement the financial advice we give you. Helping you preserve everything you’ve worked so hard to achieve and ensure that it’s passed on to who you want is a natural extension of what we do.

So, if you’re looking for help with any aspect of protecting either yourself or your estate, please call us on 020 3714 9565 or ask us to call you by sending an email to admin@onefinancialsolutions.co.uk.