What is a Power of Attorney?

Financial security in retirement is one of the main concerns of most people, and every year thousands of people are planning for their retirement. They are making complex decisions on their pensions into old age, with many retirees putting their pensions into income drawdown schemes. These schemes require ongoing management of investments, giving the pension holder the responsibility of managing their own investments and income in retirement.

However, the risk of developing a sudden illness or a condition such as dementia increases with age. Figures from the Alzheimer’s Society, say that there are currently around 900,000 people with dementia in the UK and 42,000 of these people are under 65 years. This year, 209,600 more people will develop dementia, that is one every three minutes, and the total number of people who will have dementia is projected to rise to 1.6 million by 2040.

Conditions such as dementia, strokes, brain injuries and Parkinson’s disease can affect someone’s ability to make their own decisions, and more awareness of these conditions can lead people to want to secure their finances and their health in case they become too ill to handle them themselves.

The statistics above may account for the increase in the numbers of UK applications for Powers of Attorney which have, according to Office of the Public Guardians figures, increased to 3.85 million, with more than 800,000 Power of Attorney applications made in the year to April 2019 alone. However, financial giant Zurich has pointed out that there are still hundreds of thousands of people investing their pensions without this legal protection against falling ill and being unable to manage their affairs.

If a situation does arise that someone is too ill to be able to deal with their own health and finances, without a Lasting Power of Attorney document created in advance, families can find themselves locked out of an ailing loved one’s finances and facing going through a complicated court process with fees running into many thousands of pounds.

Man with dementia struggling to handle things

A Power of Attorney (PoA) is a legal document in which someone, known as the donor, gives another person, known as the attorney, the right to help them make decisions, or make decisions on their behalf.

A PoA lets the donor choose people to look after their affairs if they:

Lose mental capacity.
Develop, or think they may develop, an illness that may stop them from making decisions for themselves, for example dementia or a brain injury.

Donors need to make a PoA whilst they have the mental capacity to do so. Under the Mental Capacity Act 2005 (MCA 2005), someone is assumed to have mental capacity unless it can be proved otherwise.

When assessing the donor’s mental capacity to make a PoA you must refer to:

Sections 2 and 3 of the MCA 2005.
Chapters 2 to 4 of the MCA 2005 Code of Practice.

The British Medical Association (BMA) provides a guidance toolkit for checking mental capacity.

A PoA ensures that, should you be unable to manage your own affairs, the people that you have appointed, can manage your financial life and/or your health and welfare on your behalf. This can save a great deal of money and distress and will ensure that, as a vulnerable person, your affairs will be handled correctly and quickly. It can also safeguard you, as a vulnerable person, from the risks of adult abuse. A PoA can be as important as making a Will, as it may become effective during your lifetime.

What are the different types of Powers of Attorney?

A Power of Attorney set up before 1 October 2007 is called an Enduring Power of Attorney (EPA). It has been replaced by the Lasting Power of Attorney (LPA) for health and welfare. You can no longer make an EPA, but if one was made correctly and signed before 1 October 2007 it may still be used.

Ordinary Powers of Attorney (OPA) – An OPA is a legal document in which someone known as the donor, gives another person, known as the attorney, the right to help them make decisions, or make decisions on their behalf. It can also be called a general power of attorney. An OPA can only be used if the donor has mental capacity.

An OPA is useful when it becomes temporarily difficult for the donor to manage their affairs, for example, because they are unwell, recovering from an injury or travelling abroad. The donor can limit the attorney’s powers under an OPA, for example, they can authorise them to only deal with their financial affairs and the donor can still make decisions for themselves if they want to.

Lasting Power of Attorney (LPA) – There are two types of personal LPA, and these are for:

Property and financial affairs, which can be made for both personal and business reasons. This allows the attorney to deal with, for example, paying the donor’s bills, buying and selling their property and managing their bank accounts and investments, etc. The donor can decide whether the LPA can be used as soon as it is registered or once the donor has lost mental capacity. This LPA can also restrict the decisions an attorney can make.
Health and welfare. This covers decisions about health and care such as deciding where the donor is to live, day-to-day care, for example, diet and dress, who the donor should have contact with, and whether to give or refuse consent to medical treatment. This LPA can only be used once the donor has lost the mental capacity to make a personal welfare decision for themselves.

A business owner can make a separate LPA for property and financial affairs to appoint an attorney to make decisions about the business, should they lose mental capacity. They can still make a separate personal LPA for their personal property, financial affairs and/or health and welfare.

How to set up a Power of Attorney

There is no defined way of making an OPA as there is no standard form to complete. Many people use a solicitor to ensure OPAs are set up properly.

When setting up an LPA, it is generally recommended that you set up both a health and welfare LPA and a property and financial affairs LPA at the same time. Many people do this while financial planning for retirement or when writing or revising their Will, and you may be able to use the same solicitor for both your Will and your LPA, although the Government encourages people to apply online themselves for LPAs, making the form deceptively simple.

This works well for some people but not everybody, and it should be noted that if someone does it themselves and it is done badly, the fees for putting it right are often more than if a solicitor did it for them in the first place.

You can contact the Office of the Public Guardian for an LPA application pack:

By post at the Office of the Public Guardian, PO Box 16185, Birmingham B2 2WH.
By telephone on 0300 456 0300, lines are open Monday to Friday, 9.30am to 5pm (Wednesday, 10am to 5pm).
By email, customerservices@publicguardian.gov.uk.

Once you start the application, you will need to choose at least one attorney. The same attorney can be appointed for both LPAs, if you are applying for both, or someone different can be appointed for each. But it is sensible to appoint more than one attorney in case one of them cannot act for you in the future.

If you appoint more than one attorney, you have the right to say the attorneys must either act jointly on all your affairs, or they have to make some decisions together and some individually; for example, you can appoint attorneys to act jointly when making decisions over your finances, but state that only one attorney should make decisions on your health and wellbeing.

It is also important to think about a replacement attorney(s), in case the people you have originally chosen cannot act for you anymore. If you do not appoint any replacement attorney(s), the LPA will end when your attorney(s) can no longer act.

Whichever way the forms are completed, they must be printed out to be signed in the following order by the:

Donor.
Certificate provider*.
Attorney(s).

*The certificate provider is an independent person who confirms that the donor understands what they are doing and is not under undue pressure or fraud used to induce them to make the LPA.

The certificate provider must be over 18 and have capacity themselves and must be either:

A person who the donor has known personally for at least two years as more than an acquaintance, for example a friend or colleague.
A person with relevant professional skills and expertise to act to fulfil the role of a certificate provider, for example a medical professional, social worker or legal professional.

A certificate provider cannot be:

A member of the donor’s family or a family member of any attorney appointed under that LPA. This includes spouses / civil partners, in-laws and step-relatives or an unmarried partner of the donor or any attorney.
Any attorney or replacement attorney appointed under the current LPA or under any other LPA or Enduring Power of Attorney (EPA) executed by the donor, regardless of whether or not that other power has been revoked.
An employee or business partner of the donor or any attorney.
Any person who is the director, owner, manager or employee of a care home where the donor lives, or any family member of a person associated with the care home.

If the certificate provider is any of the above, the LPA will not be valid.

Someone must act as a witness when the donor and attorney(s) sign the LPA. They must watch them sign and then sign the form themselves. The donor and attorney(s) must not witness each other signing. The Office of the Public Guardian (OPG) receive around 15% of applications that have errors of various kinds, so have provided guidelines to help applicants avoid mistakes.

Once the Lasting Power of Attorney is completed, signed and witnessed, you or your attorney(s) will need to register it with the Office of the Public Guardian (OPG) for the LPA to be valid. Before you register it, send an LP3 form to all the “people to notify”, that you listed in the LPA; they will then have 3 weeks to raise any concerns with the OPG. It takes up to 20 weeks to register an LPA if there are no mistakes in the application.

Setting up a power of attorney with solicitor

What are the risks in naming a Power of Attorney?

When you are choosing an attorney, it is important to stress that you must trust the person(s) you choose as your attorney(s) to:

Understand your wishes.
Respect your values.
Make decisions in your best interests.

The legal criteria for an attorney are that they must:

Be at least 18 years old.
Have mental capacity.
Not be bankrupt or subject to a debt relief order if the power relates to property and financial affairs.

The attorney(s) cannot do whatever they like; they must follow the principles of the Mental Capacity Act 2005. However, there is a risk that an attorney could overstep the mark if the remit set out in the LPA is either too broad or not specific enough in terms of powers allocated, and these actions can have long-lasting consequences.

It can be difficult for a donor to hold the attorney accountable for wrongful conduct after providing such broad powers. An LPA can be drafted to limit or restrict the powers an attorney(s) can have when managing your financial affairs.

Granting an LPA to an attorney allows them to have complete control of your personal assets and provides them with the power to manage your assets in your personal interests. But there may be a chance that they abuse their power for their own interests rather than your interest, which raises concerns of trust.

They may withdraw money to spend on themselves, make poor investments, misuse your finances, and incur debt or take out loans in your name. This not only has a detrimental impact on your finances and credit rating, but it may also create tension with your family members.

This is why it is important for you to select an attorney(s) who you can trust and who you have confidence in that they would act in your personal interest and follow your instructions.

All attorneys are able to claim reasonable expenses they incur whilst acting for the donor. This includes expenses such as postage, travel costs and the cost of an accountant preparing annual accounts. This does not have to be specifically mentioned in the LPA itself but could be included should the donor wish. If the donor wishes to pay a fee beyond reasonable expenses to a non-professional attorney, this would need to be included in the LPA.

If you suspect that an attorney may be misusing an LPA or acting dishonestly, you must contact the OPG Safeguarding Unit immediately, telephone 0300 456 0300 or email: opg.safeguardingunit@publicguardian.gsi.gov.uk

What does having Power of Attorney do?

When you grant someone Lasting Power of Attorney, you are legally permitting them to manage your finances and/or your health and wellbeing when you cannot, either because of poor mental or physical health or because you are out of the country. Having an LPA in place can give you peace of mind that someone you trust is in charge of your affairs when you cannot do it for yourself.

When you become too unwell to look after yourself, a health and welfare attorney can make the decisions about:

Where you live.
How you manage daily routines like washing, eating and dressing.
How your money is spent on things that maintain or improve your quality of life; however, they must first ask the attorney looking after your money if this is separate.
What medical care you receive, unless your LPA instructs them to deny certain treatments.

Your property and financial attorney will help you manage your money when you no longer can, whether through illness or absence. But to do so, they will need to prove they have permission and prove who they are to any institutions holding your assets.

Your LPA lets them look after, for example, your:

Bank accounts.
Savings.
Investment portfolios.
Property(ies).
Businesses (if not covered by a separate Business LPA).
Taxes.
State benefits.

They may also buy food and clothing for you, and donate money on occasions such as birthdays or marriages to those related to or connected with you, and to any charities that you normally would donate to, unless explicitly stated not to in your LPA document.

How does a Power of Attorney work?

A person is unable to make a decision if they cannot do at least one of the following:

Understand the information relevant to the decision.
Retain that information.
Use or weigh that information as part of the process of making the decision.
Communicate the decision, and the reason for not being able to do this is due to an impairment of, or disturbance in, the functioning of the mind or brain.

If and when this occurs, the appointed attorney(s) is able to enact the LPA. The LPA must be registered before the named attorney(s) can start acting as an attorney. As an attorney, you should send certified copies of the LPA to each of the financial institutions the donor has dealings with. Any organisation that an attorney(s) deals with on behalf of the donor can ask them to prove that they are the attorney(s).

The attorney (s) will need to either:

Show them the original LPA.
Show them a certified copy of the LPA.
Give them access to view an online summary of the LPA.

If you find yourself being called on to act as an attorney, the chances are you will be faced with some difficult questions when you come to exercise your powers to deal with the donor’s affairs, such as an account number(s) etc. You will also be asked to prove other details, such as proof of your own identity.

As an attorney(s), you are legally bound to ensure that you look after the finances and/or health and welfare of your donor. This means you must be able to access their account(s), either on or offline. Many banks will issue you with a debit card, others may just allow internet banking access. Be willing to push back if you think the bank or other institution is being awkward to you fulfilling your duties, as you are acting on behalf of your donor, their customer.

Depending on the powers of attorney you have been given, you are entitled to switch, for example, bank savings accounts or a mortgage if you feel your donor would be better off; in fact, you are obligated to do the best you can for them.

An attorney(s) must keep a record of important decisions that they make and when, for example if they sell the donor’s home or agree to medical treatment(s). They should also record the donor’s assets, income and how they spend the donor’s money, if they are the financial affairs attorney(s). They should also include any details of who they have asked for advice and must record any disagreements.

Can you revoke Power of Attorney?

An OPA ends if the donor revokes it, using a deed of revocation, or loses mental capacity.

The donor cannot make changes to an LPA after it is registered. If you want to add another attorney, you must cancel the LPA and make a new one. If you have mental capacity, you can remove an attorney by sending OPG a partial deed of revocation and the original LPA. You must also send the attorney a copy of the partial deed of revocation.

As the donor, you can cancel your LPA if you have mental capacity. You must prepare and sign a deed of revocation in front of a witness who must also sign it. You must send to OPG the deed of revocation and the original LPA.

The LPA ends automatically when the donor dies. The attorneys can no longer act or make decisions under the LPA. The attorney(s) must notify OPG of the death and send the original LPA, all certified copies and a copy of the death certificate.

Final thoughts

LPAs require careful thought and consideration, and it is important you appreciate the need to trust the person(s) you choose as an attorney(s) to understand your wishes, respect your values and make decisions in your best interests. Then the LPA is a legal failsafe for letting loved ones take control of your affairs if you fall ill or are incapacitated.

What is a Power of Attorney?

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