Enduring Power of Attorney or Lasting Power of Attorney
When people talk about ‘power of attorney’ they are usually referring to an Enduring Power of Attorney (‘EPA’) or a Lasting Power of Attorney (‘LPA’). These are both documents which a person can use to appoint another person to look after their finances in case they are ever unable to do it for themselves. For example an older person may appoint their adult child to look after their finances if they ever developed dementia.
EPAs could be made up until 30th September 2007 when the Mental Capacity Act 2005 (‘MCA’) came into force, since that date we have had LPAs. EPAs made before the change in the law are still valid.
The main difference between an EPA and an LPA is the registration process. There are two types of LPA, an LPA cannot be used until it has been registered with the Office of the Public Guardian. An EPA can be used before registration, and the attorney appointed by an EPA is only required to register the document with the OPG once the person they act for has lost or is losing the mental capacity to manage their own finances. In practice an attorney acting under an EPA will find that banks and other financial institutions are increasingly reluctant to accept the authority of an EPA until it has been registered.
The duties of attorneys towards the person they act for are the same whether they are appointed by EPA or LPA. Attorneys must apply the MCA Code of Conduct and act at all times in the best interests of the person they act for. This can be a difficult balancing act where family is concerned; an attorney acting for their cash-rich elderly parent may find it difficult to resist the temptation to use money to help out themselves or their own children if they are struggling financially.
Attorneys also have very limited powers to make gifts or loans from the funds they manage, which I find is often misunderstood. Attorneys can only make modest seasonal gifts, and they have no authority to loan funds. Attorneys can apply to the Court of Protection for the authority to make a large gifts, or for a statutory will to be executed but to attempt to do so without authority risks the attorney being removed from their role.
An attorney who does not follow the Code of Conduct, or who breaches their authority or acts in a way that is not in the best interests of the person whose funds they manage is very much at risk of being removed from their role. Misuse of funds is known as financial abuse and it is an issue of growing concern, especially amongst professionals who work with the elderly.
A Lasting Power of Attorney (LPA) is a legal document that allows a person (donor) to appoint another person (attorney) to make decisions on their behalf in the event that they ever become unable to make decisions for themselves.
There are two types of LPA – one allows an attorney to make decisions in relation to health and welfare. The other allows an attorney to make decisions in relation to property and affairs. A person can choose to make an LPA in relation to health and welfare, property and affairs or both.
Having an LPA allows a person to be comfortable that in the unfortunate event that they do ever lose the capacity to make decisions for themselves, the person making decisions on their behalf will be a person they know, trust and whom will have an understanding of their wishes and beliefs.
In order to make an LPA, a person must be over 18, have the capacity to make their own decisions and the ability to decide who to appoint as their attorney – usually a trusted family member, friend or in some cases a professional such as a solicitor.
To make an LPA an LPA form will need to be completed. This form must be signed by somebody who is able to confirm that the person wishing to make the LPA has the capacity to do so – typically a GP, social worker or solicitor. The form will then need to be sent to the Office of the Public Guardian to be registered. An LPA can be used as soon as it has been registered with the Office of the Public Guardian. However, it is important to note that unlike a property and affairs LPA which can be used whilst the donor still has capacity, a health and welfare LPA can only be registered and used once the donor no longer has the capacity to make decisions in relation to their own welfare.
It should be noted that LPA’s replaced Enduring Powers of Attorney (EPA) in October 2007. However, an EPA is still valid and can be used providing it was made before this date. Like an LPA and EPA allows a donor to appoint a donor to make decisions in relation to his property and affairs. An EPA will not allow an attorney to make decisions in relation to health and welfare.
In the event that a person does not have an LPA or EPA and they lose the ability to make decisions for themselves a deputy will need to be appointed by the Court of Protection.