Purpose and scope of LPAs
The Mental Capacity Act 2005 introduced the Lasting Power of Attorney ("LPA") which replaced the Enduring Power of Attorney ("EPA") on 1 October 2007. LPAs allow an individual ("the donor") to choose one or more persons ("the attorney") to make certain decisions on the donor’s behalf. Two different types of LPA may be made as follows:
(a) Lasting power of attorney for health and welfare
This may only be used once the donor has lost capacity. It may give the attorney power to make decisions on matters such as the care and medical treatment of the donor and where the donor lives. It cannot, however, include authority for the attorney to:
- make decisions on issues in relation to which the donor has capacity
- consent to or refuse life-sustaining treatment (unless the LPA expressly provides for such authority), or
- authorise restraint of the donor, unless it is proportionate and exercised to prevent harm.
(b) Lasting power of attorney for property and financial affairs
This may be used before, as well as after, the donor loses capacity. It may give the attorney power to make decisions on matters such as operating a bank account for the donor, dealing with the donor’s tax affairs, making investment decisions and purchasing a property for the donor’s residence. In addition, the LPA may allow the attorney to make certain gifts of a reasonable amount to people related to or connected with the donor, or to such charities to which the donor might have made gifts. Other types of gifts (eg for tax planning purposes) will require the approval of the Court of Protection. The LPA cannot, however, include power for the attorney to:
- sign a Will
- act as trustee for the donor, or
- act as a personal representative of a Will in place of the donor.
The donor may restrict the scope of the powers included in either type of LPA as required. An attorney must always act in the donor’s best interests and the donor may include general preferences or instructions for the attorney in the LPA (eg requesting the attorney to consult certain people before exercising his or her powers under the LPA).
How do LPAs differ from EPAs?
An LPA is very similar to an EPA, but has a wider scope (an EPA could not be used to give an attorney authority to make health and welfare decisions on behalf of the donor). Another important difference is that LPAs must be registered with the Office of the Public Guardian ("OPG") before they can take effect. In contrast, EPAs were effective on signing and only had to be registered when the donor lost capacity.
Choosing an attorney
The choice of attorney is obviously of great importance since the donor will be relying on the attorney to do things on the donor’s behalf at a time when the donor can no longer deal with his or her own affairs. A spouse or partner, professional adviser, trusted friend or relative can be appointed. The attorney must be an adult when he or she signs the LPA. A trust corporation (but not an ordinary limited company) can be an attorney, but only in relation to a property and financial affairs LPA. It is very important that attorneys, when agreeing to their appointment, understand and accept the responsibility which will be placed on them as attorneys: they cannot later designate others to act as attorneys in their place. An attorney may resign from the appointment if he or she becomes unable or unwilling to act (although a set procedure must be followed if the LPA has been registered).
Choosing more than one attorney
The donor can appoint more than one attorney. If so, the donor must decide whether he or she wants the attorneys always to act together or, if they are permitted, act "jointly and severally" (ie they may all act together but they can also act separately). Alternatively the donor can specify that the attorneys are to act jointly in some matters and jointly and severally in others. If two attorneys are appointed jointly the appointment will terminate on the death or incapacity of one of them and the LPA will no longer be operative. As a result it is usually preferable to appoint two or more attorneys jointly and severally.
The LPA may appoint a substitute attorney, but it cannot give the attorney power to appoint a successor. In addition, a donor does not have power to remove one attorney leaving others in place (if he or she wishes to replace an attorney, the donor will need to revoke the whole LPA and make a new one). Nor can the donor state that the attorneys can act by majority vote. This area is complex and professional advice is recommended.
Procedure for making an LPA
The LPA has to be in a prescribed form. There is a separate form for the two different types of LPA. The OPG website allows the prescribed form to be completed online, although concerns have been raised in some quarters that the online system is vulnerable to abuse.
The donor may also choose up to five named people who will be told about the registration of the LPA.
The LPA must include a certificate confirming that the donor knows and understands the purpose and scope of the LPA, there was no fraud or undue pressure exerted in the making of the LPA and there is nothing else that would prevent the LPA being created. The certificate must be provided either by someone who has known the donor personally for at least two years or a specified professional (such as a doctor or a lawyer). Certain people are excluded from acting as the certificate provider (eg family or attorneys of the donor and certain other connected people).
The completed LPA form must be signed by the donor and the attorney and sent (either by the donor or the attorney) to the OPG for registration together with a fee. Registration can take place at any time; however, as noted above, it is only after the LPA is formally registered that the powers granted by it become operative, subject to any restrictions set out in the LPA.
Although a donor may draw up the LPA and delay registration until the onset of incapacity, the registration process (at least eight weeks) could then prevent urgent decisions being taken.
The donor can revoke the LPA at any time, provided he or she has capacity to do so. However, if the LPA has been registered the Public Guardian must be given notice of the revocation.
On the death of the donor, the authority of the attorney will cease immediately and the personal representatives of the donor will assume responsibility. In addition, a property and financial affairs LPA is automatically revoked on the bankruptcy of the donor.
In the event of the death, incapacity, resignation (or, in the case of a property and financial affairs LPA, the bankruptcy) of an attorney, or the dissolution of a marriage/civil partnership between the donor and the attorney, the LPA may be revoked unless there is a continuing attorney (or the LPA makes provision for a successor attorney).
How are existing EPAs affected?
Any EPA made before 1 October 2007 remains effective. It is not possible, however, to convert an existing EPA to an LPA. If donors wish to replace an existing EPA with an LPA they will have to revoke the EPA and draw up a new LPA.
Although the LPA forms enable people to draw up and complete LPAs for themselves, there will be many circumstances where legal advice is recommended: for example, if a person has complex business or financial interests, or if there are particular medical considerations.
If you require further information on anything covered in this briefing please contact a member of our Private Client Team on 020 3375 7000 or your usual contact at the firm. Further information can also be found on the Private Wealth page on our website.