Power of Attorney is the legal process of being requested to make decisions for someone else should they become unable to make their own decisions. A perfect example is a frail parent giving power of attorney to children or advisers if they are concerned they may lose their mental capacity to make their own decisions about finances, health and property.
This guide will explain the different types of Power of Attorneys for example, temporary or lasting, and Lasting Power of Attorney for different types of affairs. We also explain how to set one up and what happens if you don’t.
What is Power of Attorney?
Throughout our lives, we are required to make important decisions – particularly in regard to finances, property and healthcare. In most circumstances, people are able to make these decisions for themselves. On some occasions, people stop being able to make these decisions for themselves. This may be because they are very ill, or no longer be sound of mind.
In order to prepare for a situation in which somebody can no longer make their own decisions, someone trusted can officially be appointed to make decisions on their behalf. This is called making a Power of Attorney.
The person or persons who are appointed to make the decisions are known as the ‘attorneys’, and the person who they are able to make decisions on behalf of is known as the ‘donor’. It is important to remember that, in the context of Power of Attorney, the term ‘attorney’ applies to the person who is being appointed to make decisions – not to a legal professional.
Ordinary Power of Attorney is a good way to provide a trustworthy person with the power to carry out tasks which someone would ordinarily do but are unable to. For example, due to self-isolation, confinement or simply because of the anxiety associated with venturing out in public at this time.
Types of Power of Attorney
Lasting Power of Attorney
Lasting Power of Attorney (LPA), also known as enduring Power of Attorney, grants the attorneys the power to make decisions on behalf of the donor for the rest of the donor’s life. This is necessary to make decisions on behalf of someone that has lost their mental capacity and are no longer able to make their own decisions.
Setting up a Lasting Power of Attorney is a good idea if you are worried that your parent(s) will stop being able to look after their own affairs. Having an LPA can help to avoid scenarios in which your parent is unable to make decisions that are in their best interest, and you are legally unable to do so on their behalf.
There are two types of Lasting Power of Attorney, which cover different types of affairs. They have to be applied for separately, but the same attorneys can be used for both. They are:
Property and Financial Affairs LPA
A property and financial affairs LPA covers decisions regarding wealth and property. This can include:
- selling a home
- paying the mortgage
- investing money
- paying bills
- arranging repairs to a property
Personal Welfare LPA
A Personal Welfare LPA covers healthcare and personal welfare decisions.
This can include decisions about:
- where your parents should live
- their medical care
- what they should eat
- who they should have contact with
- what kind of social activities they should take part in.
An LPA is only valid if your parents have the mental capacity to set it up and haven’t been put under any pressure to create it. The LPA must be signed by a certificate provider – someone they know well and is able to confirm that the donor is of sound mind. It can only be used once it is registered with the Office of the Public Guardian.
Ordinary Power of Attorney
If somebody is still of sound mind but wants to give someone they trust the temporary authority to make decisions about their finances they can set up an Ordinary Power of Attorney. It is only valid while they have the mental capacity to make their own decisions about their finances.
An example of when Ordinary Power of Attorney may be useful is if your parent is going into hospital and they want someone to deal with their bank account while they are there.
The power given can be limited so that the attorney only deals with certain assets, for example, a bank account, but not their home. Ordinary Power of Attorney does not need to be registered with the Office of the Public Guardian.
Setting up Power of Attorney
The process of setting up Power of Attorney depends on the type of attorney that somebody is looking to set up.
Setting up Ordinary Power of Attorney
Ordinary Power of Attorney does not have official forms, but your instructions document needs to follow a set structure. There are no Ordinary Power of Attorney fees, as it does not need to be officially registered.
Setting up Lasting Power of Attorney
Lasting Power of Attorney requires specific forms to be filled out, and needs to be signed by an independent certificate provider. This must be a person that can verify that the donor is of sound mind. It then needs to be registered with the Office of the Public Guardian. Registering the LPA can take up to 10 weeks, and costs £82 per application. People earning less than £12,000/year can pay a reduced fee of £41.
What happens if there is no Power of Attorney?
If someone is mentally incapable of making a particular decision at a particular time, and they haven’t made an LPA, and the decision isn’t one that can be made on an informal basis, the matter can be referred to the Court of Protection. The court may either choose to make the decision itself on the person’s behalf, or choose someone else, known as a “deputy”, to make the decision for them.
Where the court appoints a deputy to manage someone’s financial and property affairs on an ongoing basis, the deputy usually has to keep accounts, enter into a security bond, and report to the Office of the Public Guardian. The Court of Protection charges an application fee, and the Office of the Public Guardian charges a yearly fee to cover the cost of supervising the deputy’s work.
Power of Attorney Frequently Asked Questions
Can more than 1 person be made an attorney?
Yes, it is common to assign multiple attorneys. This can be helpful as the attorneys can work together to make decisions. The donor will have to state in the LPA forms whether they want their attorneys to make decisions jointly or not.
Can an LPA be cancelled by the donor?
If they still have the mental capacity, then an LPA can be cancelled by the donor. To do this, they need to sign a deed of revocation. A person may do this if they no longer trust the nominated attorney to manage their affairs, or if their nominated attorney is no longer a practical choice e.g. they may have moved to another country.
Can an LPA be cancelled by the attorney?
Yes, an attorney can cancel a Lasting Power of Attorney. This is sometimes referred to as 'revoking attorneyship'. To do so, they need to complete an LPA005 form, and inform the other attorneys.
Someone may do this because their relationship with the donor has changed, or they no longer feel as though they are in a position to act as their attorney due to changes in their own circumstances.
When does an LPA end?
If the LPA is not cancelled, the LPA ends when the donor dies. At this point, the appointed attorneys can no longer make decisions on their behalf. Responsibility for managing the estate of the deceased passes over to the executors of the Will (often the same people.)
How much does Power of Attorney cost?
It costs £82 to register for an LPA. This can be reduced to £41 for people who can prove that they earn less than £12,000.