All you ever wanted to know about Lasting Power of Attorney but were to scared ask!
A lasting power of attorney (LPA) gives a person or persons (known as attorney(s)) the authority to act for another person (known as the donor) if the donor is unable to do so himself. That authority continues even if the donor loses the mental capacity to make decisions for himself.
An LPA for financial decisions gives authority to the attorney(s) in relation to the donor's property and financial affairs. It is also possible for a donor to have a different type of LPA for health and care decisions.
Here you will find guidance on:
- How you can be appointed as an attorney to make financial decisions for the donor.
- Your role, duties and responsibilities.
- What you are and are not allowed to do as an attorney.
- The registration of LPAs.
- When your role as attorney will end.
APPOINTMENT AS ATTORNEY
An attorney can be anyone that the donor trusts to act on his behalf. You do not need any special qualifications but you must be:
- Over the age of 18.
- Financially solvent (not bankrupt or subject to a debt relief order).
You can refuse to be appointed as an attorney if you wish (in which case you should not sign the LPA form). If you do decide to accept an appointment, it is important that you feel capable of managing the donor's affairs for an indefinite period if he is unable to do so himself. Depending on how complicated the donor's financial affairs are, this could take a substantial amount of time.
How is an attorney appointed?
An LPA must be made using a specific form (called an LP1F form). The form must be signed by:
- The donor, in front of a witness.
- A person who is able to certify that the donor understands what he is signing (the certificate provider).
- The attorney(s), in front of a witness.
The LPA form is completed by the donor (or by a professional on the donor's behalf) and includes your personal details. Once the form is completed, it must be signed in the right order. The donor must sign first, then the certificate provider and then you and any other attorneys.
When signing the LPA, you are confirming that you have read section 8 of the form (your legal rights and responsibilities) and that you understand your duties and role. You also acknowledge that the LPA must be registered before you can use it.
It is possible for a donor to appoint more than one person to act as an attorney. Replacement attorneys should also be appointed.
Multiple attorneys can be appointed in the following ways:
- Jointly. If attorneys are appointed to make decisions jointly, they can only act together. This may prove inconvenient, particularly for day-to-day decisions. The LPA terminates if one of the attorneys can no longer act (or dies) unless a replacement is named in the LPA.
- Jointly and severally. If attorneys are appointed to make decisions jointly and severally, they may act either together or independently. This provides more flexibility than appointing attorneys to act jointly and means that the remaining attorney(s) can continue to act even if one becomes incapable of doing so (or dies). The downside of this flexibility is that one attorney may act in a way that the other attorney(s) would not endorse.
- Jointly when making some decisions and jointly and severally when making other decisions. This option can provide a compromise between allowing sufficient flexibility for attorneys to act independently for day-to-day matters and jointly in relation to more important decisions. The donor specifies which decisions the attorneys must take jointly.
- Solely. Only one Attorney can act for you at any one time and all the others you appoint will be reserves and appointed to act in the order that you specify should anything happen to the Sole Attorney appointed to act or acting at the time.
When discussing your appointment with the donor, you must ensure that you feel comfortable working with any other people who will also act as attorneys.
WHAT CAN I DO AS AN ATTORNEY?
What are my duties as an attorney?
If the donor loses mental capacity, you will need to manage his property and affairs and make any decisions that he is unable to make himself. For example, this might include:
- Paying bills.
- Operating bank accounts.
- Making investment decisions.
- Selling property.
The donor may specify in his LPA that you can act as attorney even while he still has the capacity to make financial decisions for himself. This does not mean that you can make all financial decisions for the donor, it just means that you can act on behalf of the donor if he allows you to do so at the time. This can be helpful if the donor is unwell (for example, he is physically unable to get to the bank) or on holiday for an extended period of time.
Will I be paid?
You can recover all of your out-of-pocket expenses from the donor. Out-of-pocket expenses include, for example, the cost of telephone calls to the donor, travel to the donor's bank and postage to pay the donor's household expenses.
You can only receive fees for acting as an attorney if the donor has expressly authorised payment in the instructions section (section 7) of the LPA form. If you do not want to take on the role of attorney without payment, you should discuss this with the donor and check the LPA form carefully before signing.
What are the limits on what I can and cannot do?
- Restrictions imposed by law under the Mental Capacity Act 2005. The Mental Capacity Act 2005 (MCA 2005) covers LPAs and what you can do as an attorney. The MCA 2005 contains the following five important principles that you must observe:
- A person must be assumed to have capacity unless it is established that they lack capacity. This means that you must assume that the donor has capacity to make financial decisions and consider each decision as the donor makes it, giving him support to make the decision himself, if he is able to do so.
- A person is not to be treated as unable to make a decision unless all practicable steps to help him to do so are taken without success. Some people need help to make or communicate a decision. For example, you may need to help the donor with non-verbal communication (for example, writing down a decision or communicating by sign language) or provide relevant information in a more accessible format. The donor may have fluctuating capacity so there might, for example, be a particular time of day when it is best to try to help him to reach a decision.
- A person is not to be treated as unable to make a decision merely because he makes an unwise decision. It is important to recognise that the donor is an individual who may have very different beliefs, values and attitudes to you. This means that he may make a decision that you consider unwise, even though he does have capacity to make that decision.
- An act done, or decision made, under the MCA 2005 for or on behalf of a person who lacks capacity must be done or made in his best interests. This is of fundamental importance and should underpin everything that you do on behalf of the donor.
- Before the act is done, or the decision made, consider whether the purpose for which it is needed can be as effectively achieved in a way that is less restrictive of the person's rights and freedom of action. You should always consider whether any act on behalf of the donor could be done in a less restrictive way.
MCA 2005 is supplemented by the Mental Capacity Act Code of Practice. You are legally obliged to consider the Code of Practice that contains helpful guidance for attorneys and explains how the principles should be applied in practical scenarios. You may find it useful to read Chapter 7 of the Code of Practice before taking up your appointment (see www.gov.uk/government/publications/mental-capacity-act-code-of-practice).
- Record keeping. You must keep accounts, receipts and records of financial transactions made on behalf of the donor. The Office of the Public Guardian (OPG) may ask you to produce these at any time. You should also keep your own finances completely separate from those of the donor.
- Gifts. There are strict limits on the kinds of gift that you can make on the donor's behalf. For example, you can give birthday, Christmas and wedding presents provided that the gifts are reasonable, with regard to the donor's financial resources. You cannot make gifts for inheritance tax planning or pay school fees for the donor's grandchildren without making an application to court. If you are in any doubt about whether you can make a gift using the donor's funds, seek professional advice or guidance from the OPG.
- Other restrictions imposed by law. If you are an unpaid attorney, you must apply the same care and skill that you would use to make decisions about your own life. Attorneys who are paid for their services, or claim to have particular skills or qualifications, must show a higher degree of care and skill.
You must also ensure that you:
- Do not place yourself in a position where your own personal interests conflict with those of the donor or where there is a real possibility that this will happen.
- Do not receive any unauthorised profit from your position as attorney.
- Keep the affairs of the donor confidential.
- Do not delegate your authority as attorney to anyone else, although you may take professional advice (for example, from an investment manager if the donor has given express authority in the instructions box in section 7 of the LPA).
- Act with honesty.
- Donor's instructions. The donor can place additional restrictions on your authority in the LPA. These are called instructions and you should check any wording that is included in the instructions box in section 7 of the LPA very carefully before you sign it. Common instructions in an LPA for financial decisions include:
- Requiring you to submit annual accounts to a person of the donor's choice.
- Allowing you to appoint an investment manager to make decisions about the donor's investments.
- Donor's preferences. The donor can provide advice in the LPA about how he would like you to manage his affairs. Unlike an instruction, this indicates the donor's preference, rather than something that you must do. For example, it might say that the donor would prefer you not to invest in tobacco companies or that he would like to keep his current account at a specific bank.
Can I deal with the donor's business interests?
Generally speaking, an attorney under an LPA can deal with the donor's business interests. However, you should check whether there is anything in the instructions section (section 7) of the LPA that states that you do not have authority to do this. A director of a company cannot delegate his powers and responsibilities to an attorney unless the articles of association of the company specifically allow it.
Who checks that I am acting properly?
Anyone who suspects that an attorney is not performing his duties properly, or is exploiting or abusing the donor, can contact the OPG. The OPG then looks into the complaint and may direct one of the team of visitors to visit an attorney and investigate. In more serious cases, the OPG refers the matter to the Court of Protection.
If you have concerns about a co-attorney, you should raise them with the co-attorney first and then, if it cannot be resolved, with the OPG.
Am I protected if things go wrong?
If you act in accordance with your legal duties and, in particular, in the best interests of the donor, then it is very unlikely that you will be criticised for any decisions that you made on behalf of the donor.
If you act under a registered LPA that turns out to be invalid, you will not incur any liability (to the donor or anyone else) unless:
- You knew that the LPA was invalid.
- You were aware of circumstances that would have terminated your authority to act under the LPA, if it was valid.
If you have acted improperly:
- You may need pay the donor money to compensate for the donor's loss.
- In the case of ill-treatment or wilful neglect of the donor, an attorney can be found guilty of a criminal offence punishable by a fine or imprisonment of up to five years.
- You could be charged with fraud.
Registration of LPAs with the Office of the Poblic Guardian (OPG)
If you are fit and healthy and have no reason to believe that you will need to use your LPAs any time soon then it may well be a sensible idea to consider delaying their registration and instead opt to store them with us for £12 + vat per year. The reason for this is that registration costs £110 per power, so in the case of couples, this would be an extra £440 to pay up front for something that may never be needed. Arranging and signing the grants while you have mental capacity is essential and very sensible, however, registering them should be considered carefully as it could prove to be an unnecessary expense if neither or only one party should need them in the future. On the other hand you should also be aware that it can take up to 13 weeks for the OPG to turn registration applications around so if they were needed urgently there could be an issue if they were not already registered. On balance most conditions that may need LPAs to be used are chronic and degenerative so in most cases the need for them could be seen well in advance with the exception of course being with things such as a stroke which can happen at any time and without warning. Whichever way you choose though we do insist that one way or the other is chosen as historically it has been very common for individuals suffering from dementia for example to start to distrust those very people that love them the most and destroy important documents such as Wills** and unregistered LPAs so we do insist now that they are either registered with the OPG or stored with ourselves ready to be activated when needed.
**Which is why we always recommend a second original Will be produced that is signed and witnessed ready for use either given to one of the Executors or stored with ourselves. Clients only pay one fee of £12 + vat per year. This fee covers a couple or a single person and the storage of up to 10 documents, so once paid, the Wills. Trusts, LPAs and any other important documents such as birth certificates, death certificates, deeds etc can all be stored under the one fee.
If you are in receipt of any State Benefits
It is possible that you may be eligible for an exemption of the registration fee which is payable to the Office of the Public Guardian if you are uin receipt of any of the listed benefits below, or a reduction in fees if your income is under £12,000 per year. Therefore please alert us and we can apply for this on your behalf. You will need to provide us with evidence of your Benefits/income in order for us to do this. Please therefore forward this additional documentation to us when you sign and date this document and return it to us.
- Income Support
- Income-based Employment and Support Allowance
- Income-based Jobseeker’s Allowance
- Guarantee Credit element of State Pension Credit
- Housing Benefit
- Council Tax Reduction/Support – also known by other names (not the 25% single person discount or the
Class U exemption)
- Local Housing Allowance
- A combination of Working Tax Credit and at least one of:
– Child Tax Credit
– Disability Element of Working Tax Credit
– Severe Disability Element of Working Tax Credit
- Not included: Disability Living Allowance, Invalidity Benefit, Personal Independence Payment
If the donor has been awarded personal injury damages of more than £16,000 which were ignored when they were assessed for one of the above benefits, they will not qualify for exemption.
Supporting evidence for exemption
You need to send copies of letters from a benefit provider showing the donor received at least one of the listed benefits at the time you applied to register. Letters must confirm that the benefit was being paid to the donor and include their printed details (title, full name, address and postcode).
HOW IS THE LPA IS USED AFTER REGISTRATION?
When you start using the LPA, you may need to provide evidence of your authority to:
- Utility companies.
- The local authority.
- Care homes.
- Other third parties.
The requirements of each individual or organisation vary, for example, some may need to see the original registered LPA while others may only want a photocopy.
You should avoid sending the original registered LPA by post to a third party. Offer to supply an office or certified copy instead. You can get office copies from the OPG at a cost of £35 a document. Alternatively, a solicitor or accountant can certify a copy of the LPA.
HOW DOES MY APPOINTMENT END?
Death of donor or attorney
When the donor dies, the LPA automatically comes to an end. Send the original LPA and the death certificate to the OPG as soon as possible.
If you are appointed as a joint attorney and one of the other attorneys dies, your appointment will end unless a replacement is appointed.
Giving up your appointment
You can decide to stop acting as an attorney at any time. If the LPA is registered, you must send form LPA005 to the OPG to disclaim your appointment. You must also inform:
- The donor.
- All other attorneys.