Planning for the worst: Lasting Powers of Attorney

Loss of capacity is of course a difficult prospect and one that many individuals, particularly while they are young and healthy, would rather not consider. However, temporary or permanent incapacity may occur at any time and often without warning. It is therefore important that proper planning is undertaken – and before it is too late.

In the first of a series of briefings, Lucy Sharp discusses one of the primary capacity planning tools available to our clients: Lasting Powers of Attorney.

What is a Lasting Power of Attorney?

A Lasting Power of Attorney, or “LPA”, is a legal document that allows you to nominate a trusted individual (or individuals) to manage your affairs should you lose mental capacity (either temporarily or permanently). This person would act as your “attorney”, and might be a family member, close friend, or trusted personal adviser.

There are two types of LPAs – financial decisions and health decisions – and you can appoint different people as your attorneys for both.

Importantly, it is only possible to put an LPA in place while you have mental capacity. It is therefore something that should be considered sooner rather than later.

What do you need to think about?

We recognise that appointing an attorney is a big decision. On the one hand, preparing an LPA brings peace of mind (both for you and your family) that your affairs will be looked after for the rest of your life – and by someone that you trust. However, at the same time, as your attorney that person will effectively have control over your assets and / or decisions related to your welfare. It is therefore essential that the right person (or persons) is / are appointed, and that proper thought is given to the powers that you are giving them.

So, let’s break this down.

Who should I appoint?

While this seems an obvious question, it is nevertheless important to get right. Not only should you appoint somebody that you trust, but you should also consider what would happen if, when the time comes, that person cannot act (for example, they may have predeceased you or no longer have capacity themselves). You may also wish to appoint different people for financial and health decisions.

It is important that your choice of attorney is freely made and you do not feel pressure to appoint a certain person. For some people, a family member (such as a child) will be the obvious choice but for others, having a friend or professional act might be more appropriate. If you are concerned that your choice of attorney may cause disagreement, you do not have to tell anyone who you have appointed. However, in our experience, we often see family disputes started by this kind of secrecy when capacity starts to become an issue. These disputes may even lead to the validity of the LPA being called into question, which would undo the careful planning you have put in place. Each family is different but having open and honest conversations sooner, even if difficult, can save trouble down the line.

What are my assets?

Many of our clients have complex or high value assets, and a blanket approach to appointing attorneys is therefore not always appropriate. As well as appointing different attorneys for finance and health, you may wish to appoint different individuals as your attorney for certain assets. We often see this where clients hold valuable business interests.

Where multiple attorneys are appointed across multiple LPAs, it is vital that the extent of their powers is clearly demarcated in the drafting in order to avoid potential conflict in the future.

Where are my assets?

In the internationally mobile world that we live in today, our clients often own assets and spend time in a number of countries, as well as the UK. While an English LPA will often be recognised by different legal jurisdictions, this is not always the case.

It is therefore important to consider all jurisdictions in which you hold significant assets to ensure that necessary provisions are put in place – both to protect your assets if you lose capacity and to ensure that decisions can be made in relation to your welfare if required. This may involve appointing different attorneys in different jurisdictions.

With our global professional connections, we are well placed to coordinate advice from multiple jurisdictions to ensure that complimentary arrangements are put in place for our clients’ worldwide estates.

Do I have any particular wishes?

Understandably, you may have particular concerns in relation to the management of certain assets or preferences as to the care you receive. Preparing an LPA allows you to give specific instructions to your attorneys, both for finance and health, and to express your wishes.

An LPA for health also allows you to make a decision about life sustaining treatment and the extent to which your attorney(s) can make such decisions on your behalf. You may also wish to make an Advance Decision, or “Living Will”, setting out your preferences as to medical treatment. We are well versed in preparing Advance Decisions and ensuring they work effectively alongside LPAs for health.

What happens if you don’t have an LPA?

If you lose capacity and have not appointed an attorney, your affairs would instead be handled by a Court appointed “deputy” and your family would need to make an application to the Court of Protection for that appointment to be made. However, it can take up to three months for the COP to appoint a deputy and there is no guarantee that the person appointed by the Court will be the person you would have chosen. Not only is this often a long and costly process, but there is the risk that your affairs will go un-managed until such time as a deputy is appointed.

If you require further information about anything covered in this briefing, please contact Lucy Sharp or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2023