These blogs are written by third party guest authors to help provide additional insight and perspective.
Next up in our later life mortgages and borrowing series is a guide kindly supplied by Samuel Flower – Solicitor, at Gotelees
You may have heard the term ‘Power of Attorney’ and wondered what it meant and whether you need to organise this for yourself or your loved ones. This guide, kindly written by Samuel Flower, Solicitor at Gotelees, explains the similarities and differences between the various types of Power of Attorney.
You might be thinking ‘Power of Attorney’, ‘Enduring Power of Attorney’ and ‘Lasting Powers of Attorney could all be the same right? Afraid not, although they do have similarities.
Power of Attorney (PoA)
A Power of Attorney (PoA) also known as an Ordinary or General Power of Attorney is often used in business and commercial settings. It allows the person making the PoA (the Donor) to legally authorise another (the Attorney) to deal with their property and financial affairs generally or it can be limited to a specific transaction. The authority under the PoA ceases if the Donor dies, loses mental capacity, the specific transaction has completed, or it has been longer than 12 months since the PoA was made and hasn’t been renewed.
An Enduring Power of Attorney (EPA)
An Enduring Power of Attorney (EPA) is similar, in that the Donor grants general or specific authority to an Attorney(s) to deal with their property and financial affairs, but specifically caters for a situation where the Donor loses mental capacity. Put simply, it ‘endures’ through the Donor’s loss of mental capacity but must have been made before mental capacity had been lost. An EPA is most often used by family members or close friends to manage the Donor’s property and financial affairs rather than in a commercial setting. However, since 1 October 2007 it is no longer possible to create new EPAs, but EPAs completed before this date are still valid.
Lasting Powers of Attorney (LPAs)
Lastly, Lasting Powers of Attorney (LPAs). These are incredibly similar to EPAs and people with mental capacity have been able to make these since being introduced on 1 October 2007. There are two types of Lasting Powers of Attorney: one as you may have guessed, is in relation to Property and Financial Affairs but a new type was introduced, and this relates to Health and Welfare. For LPAs to be used by your attorneys, they must be registered with the Office of the Public Guardian (OPG).
At the time of writing, it costs £82 per LPA to register, unless you qualify for a remission or exemption from the fee. See www.gov.uk for more details.
The Health and Welfare LPA can only be used when/if the donor loses mental capacity. The Property and Financial Affairs LPA, once registered, can be used by your attorneys, if you give your permission to your attorney to do so. This can be particularly useful, if it becomes physically difficult for you to get around.
Why do I need an LPA?
You might be thinking that you don’t. After all, your partner, spouse or children can help with your finances, pay your bills, ensure your mortgage is paid monthly and assist with your care needs if you lose mental capacity, right? Unfortunately, it is not as easy and straightforward as that.
Whilst your partner, spouse or even children might have a joint bank account with you and can therefore access your money to pay bills and help you manage your finances, this is not always the case. Even if there is a joint account, if you were to lose the mental capacity to allow them to continue to access your money in this way they should not do so, and the account could potentially be frozen by the bank to prevent this. Put simply, if you lose mental capacity on a permanent or even temporary basis, then your nearest and dearest do not have the legal authority to deal with your assets. Unless you have an LPA for Property and Financial Affairs (or previously made an EPA).
Decisions relating to your Health and Welfare also need to be considered. If you lose mental capacity, ultimately the local authority and adult social care team will, usually in contemplation with family but not always, make these kinds of decisions for you.
In order to retain a degree of control over your Property and Finances and Health and Welfare you need an LPA. There is a common misconception that only those of a certain age require LPAs but as we have all seen from circumstances over the last year or so, mental capacity and unforeseen events can occur at any time and affect any one of us. For example, are you a sole trader or running a business? Would your business be able to continue without you if you suddenly lost mental capacity? An LPA is vital at any age.
Like many elderly couples, Mr and Mrs Smith were reliant on one another. Sadly, when Mr Smith recently died, this left Mrs Smith with the burden of all their joint responsibilities. Initially, she coped very well but as time went on, she found that she was becoming less mobile and ever so slightly forgetful. It meant she found it difficult to get to the bank and withdraw money for her gardener and to attend the supermarket to do her weekly shop.
Mrs Smith’s children suggested she might want to make an LPA so they would have the legal authority to deal with the bank and other organisations, to ensure she always had enough money and food to hand without having to worry about whether she could make it into town that week.
Mrs Smith contacted her solicitor who was able to take her instructions, draft the Lasting Powers of Attorney, act as the Certificate Provider (the person with professional experience, confirming the Donor has mental capacity) and register the LPAs so the ‘life admin’ burden could be eased for Mrs Smith.
An LPA is protection and peace of mind not only for you but also for your loved ones. It is never easy when you or a loved one loses mental capacity, however, having an LPA in place can make life as comfortable as possible for you and reduce the burden placed on your loved ones.
Guest post supplied by Samuel Flower, Gotelees. By publishing and hosting information from guest authors on the Ipswich Building Society website this does not constitute an affiliation with, nor a recommendation of, any third party organisation. We recommend that if the content of this article applies to you, or if you require further information on the particular topic it raises, that you seek specialist advice.