Too Good to Deny Future Generations
Welcome to another article in this series giving information on putting your affairs in order, written by Steve Pitts, Partner at Thursfields LLP, who are Worcestershire-based solicitors. In the first article we discussed Wills, in the second we discussed Inheritance Tax and this third will discuss the Power of Attorney.
Powers of Attorney
Is it human nature to believe that you will be able to deal with your own affairs for the whole of youe lifetime? Who can honestly say they have no forgotten names, or why they went into a room for something, or "now where did I put my keys"? Life can also play its own game. You could be involved in an accident at any time. I saw a Client recently who his doctors thought had experienced a stroke, but when all the tests proved that it was not a stroke, he was diagnosed that he had motor neurone disease. Within six months, he had gone from still working to being literally unable to hold a pen, let alone sign his signature.
Whilst it is difficult for us to consider our possible frailties, it is even more difficult to have that kind of conversation with your parents, grandparents and other family members. However, the sooner you can have that kind of conversation the better, and it is essential to do this before there is an obvious problem. It is better to involve as much of the family as possible, as long as there are no tricky issues in the family to be negotiated. It is wise to get these issues resolved.
A General Power of Attorney (GPA)
This is a very short document and is affective immediately as soon as it is signed. However it becomes invalid, so unusable, when you become mentally incapable, though quite when that might be is another matter.
A GPA is often used (a) in combination with Lasting Powers of Attoney (see below) as they can often be used immediately and (b) by those in business, for example, to provide for alternative people to sign cheques for the business or to make other business decisions (whilst people are away on holiday or away ill).
Lasting Powers of Attorney
LPAs were designed to avoid the problem of the GPA as they 'last', or continue, if you become mentally incapable. LPAs replaced from the 1st of October 2007 the previous system of Enduring Powers of Attorney (EPA). If you have an EPA it is still valid and still usable.
Capacity for an LPA
This is a tricky area. The tests under the Mental Capacity Act are difficult. More and more people are being diagnosed as having one of the dementias. As with most diagnoses, there is still a big range in what this actually means. Short term memory loss is probably the first and most obvious sign that something is wrong, but even having chronic short term memory loss may not, of itself, mean that you do not have capacity to make an LPA.
The difficulty is that if this is left too late and you no longer have capactiy then you cannot make a LPA or GPA. In such a case then an application to the Court of Protection is the only alternative and this is slower and more expensive.
The two types of LPAs
There are two types of LPA. One type is for your financial matters and personal affairs and the other type is for health and welfare issues. For example, paying for private care in your own home is a financial matter, but choosing the care provider is a health and welfare matter.
The LPA for health and welfare can only be used when you cannot make those decisions yourself. If you can make those decisions, but do not want to, then nobody can make them for you. This type of LPA also allows you to choose to allow your attorneys to make 'life sustaining decisions' for you, or no provided you cannot make that decision yourself.
Who chooses my Attorneys?
You do! So your choice of attorneys is therefore very important. They must be people you can trust implicitly. If you appoint more than one, you choose how they make their decisions either 'jointly' (not usually recommended) or 'jointly and severally'. So the difference between all of the attorneys having to sign (jointly) or all or one or some of the attorneys having to sign (jointly and severally). If more than one attorney is appointed then they have to act unanimously (as opposed to by a majority decision). So the Attorneys need to 'get on'.
Can I appoint Replacement Attorneys?
The LPA can specify that if an attorney dies, then a named replacement can be appointed in their place.
Can Attorneys make gifts?
Attorneys have limited powers to make gifts on a customary occasion, for example birthdays or Christmas or weddings. They do not have the power to, say, make gifts for Inheritance Tax type reasons. If this was being considered, then an application to the Court of Protection for approval of such a gift would be needed.
When can an LPA be used?
An LPA can only be used after it has been registered with the Office of the Public Guardian (OPG). However an LPA can be signed and not registered straight away (which keeps costs down) but if it was ever needed to be used, the registration would then be required. Your attorneys can use the LPA even if you could look after your own affairs but you have asked them to take on this task.
Most LPAs start to be used either because you have asked for the LPA to be used or because, frankly, you cannot make that kind of decision anymore. In my late mother's case it was the latter, in my later father's case it was the former. My parents signed EPAs in 1993 and they were first used in 2008. There is nothing like planning ahead!
Do I have to use a Solicitor to do an LPA? Can I complete an LPA myself?
No, you do not have to take legal advice. So yes, you can do the LPA yourself. The LPAs and all the registration forms are on the OPG's website. If in any doubt, then do get proper advice. The forms are prescribed forms, so the right form must be used and completed correctly.
If you have an LPA and never need to use it, then like any other form of insurance or forward planning, this will have been unnecessary. However, if you ever need to use an LLPA (or EPA) then these are invaluable, as they make the task of attorneys so much easier. This means you can spend less time on such matters and more time with the person who gave you the LPA, a 'win-win' situation.
Postscript - changes to the LPA forms
Please be aware that there are now new prescribed forms of LPAs (and some changes to procedures) since the 1st July 2015. The existing prescribed forms can still be used, as I understand this, uintil the end of December 2015. These will be the third set of forms of LPAs since the 1st October 2007 when LPAs replaced EPAs.
Steve Pitts is passionate about the SVR, and has joined the SVR Charitable Trust as a fundraising volunteer. Thursfields Solicitors are also kindly offering discounts on Will-Writing services and have recently sponsored our first Charity Day at Worcester Racecourse to much success.
Severn Valley Railway Charitable Trust Ltd
Number One, Comberton Place, Kidderminster, DY10 1QR Registered Charity Number: 1092723