Understanding the Basics - What is a Power of Attorney?

A Power of Attorney is a legal document that allows you to appoint one or more people you trust to act on your behalf. These individuals are known as your attorneys.

Depending on the type of Power of Attorney, your attorneys may be authorised to deal with your property and financial affairs or make decisions concerning your health and welfare.

Many people make a Power of Attorney as a precaution in case they become unable to manage their affairs because of illness, injury or loss of mental capacity. It can also be useful where assistance is required with certain matters, even though the individual remains fully capable of making their own decisions.

This guide explains the different types of Power of Attorney available in England and Wales, how they work and how they can be put in place.

Understanding Power of Attorney

A Power of Attorney gives another person legal authority to act on your behalf. The person making the Power of Attorney is known as the donor and the person appointed to act is known as the attorney.

Many people assume that a husband, wife, partner or adult child can automatically deal with their affairs if they lose mental capacity. In most cases this is not correct. Banks, investment providers and other organisations will often require formal legal authority before discussing accounts or accepting instructions.

By making a Power of Attorney, you decide who should act for you and how decisions should be made should the need arise.

Types of Power of Attorney

There are three main types of Power of Attorney recognised in England and Wales.

• General Power of Attorney

A General Power of Attorney (GPA) is designed for temporary situations where you need someone to manage your affairs while you still have mental capacity. This could be due to a physical illness, hospitalisation, or even temporary relocation. Typically, a GPA becomes active immediately upon signing and can be easily revoked.

The flexibility of a GPA makes it ideal for short-term financial management. Since the donor retains mental capacity, they can revoke the power at any time, ensuring they remain in control. This type of POA is a practical solution for managing your property and financial affairs during specific, temporary periods.

• Enduring Power of Attorney

An Enduring Power of Attorney (EPA) was the predecessor to the Lasting Power of Attorney.

Although it is no longer possible to create a new EPA, those signed before 1 October 2007 remain valid.

An EPA only covers property and financial affairs. If the donor begins to lose mental capacity, the attorney must apply to register the EPA with the Office of the Public Guardian before continuing to act.

• Lasting Power of Attorney

Introduced in 2007, the Lasting Power of Attorney (LPA) replaced the Enduring Power of Attorney (EPA) and provides a more comprehensive framework for managing an individual's affairs. A Lasting Power of Attorney (LPA) is the current form of Power of Attorney in England and Wales.

There are two types of Lasting Power of Attorney.

Property and Financial Affairs Lasting Power of Attorney. 

This allows your attorneys to deal with matters such as:

• Bank and building society accounts
• Payment of bills
• Investments
• Buying or selling property
• Pension and tax matters

Once registered with the Office of the Public Guardian, this type of LPA may be used whilst the donor still has mental capacity if the donor has chosen this option.

Health and Welfare Lasting Power of Attorney

This allows your attorneys to make decisions concerning:

• Medical treatment
• Care arrangements
• Where you live
• Day to day welfare

Unlike a Property and Financial Affairs LPA, a Health and Welfare LPA can only be used when the donor lacks the mental capacity to make the relevant decisions themselves.

Both types of LPA must be registered with the Office of the Public Guardian before they can be used.

The Role of an Attorney

An attorney appointed through a Power of Attorney must:

• Act in the donor’s best interests
• Take reasonable care when making decisions on their behalf
• Assist the donor in making their own decisions where possible, rather than simply taking control
• Remember that their authority is limited to the scope specified in the LPA and does not extend to unlimited decision making.

If an attorney is unsure about the best decision, they can seek advice but cannot delegate decision-making unless authorised by the LPA. 

Attorneys must also check the donor’s mental capacity on a decision-by-decision basis, especially if their authority is contingent on the donor lacking capacity. Failure to perform their duties properly can result in legal consequences, including compensating the donor for losses or facing criminal charges.

Choosing Your Attorney

Selecting the right attorney is crucial. It’s common to have between one and four attorneys, and you can specify how you want them to act jointly. 

Choose someone who:

• knows you well
• is trustworthy
• is reliable
• has the necessary skills to manage your affairs

Consider how well the potential attorney manages their own finances or makes decisions about wellbeing.

Before appointing an attorney, ensure they are willing to take on the role by discussing your wishes and preferences with them. It’s also wise to appoint replacement attorneys to provide extra reassurance if your first choice can no longer fulfil the role. This careful selection process ensures your affairs are managed by someone who understands and respects your wishes.

How to Create a Power of Attorney

Creating a Power of Attorney involves several steps. The first step is to choose one or more attorneys who will be responsible for making decisions on your behalf. After selecting the attorney(s), you must fill in specific forms to appoint them officially. These forms can be obtained from the Office of the Public Guardian or downloaded online.

Once the forms are completed, the LPA must be registered with the Office of the Public Guardian, a process that costs £92, although some donors may qualify for a reduction or exemption. This registration is crucial as it validates the LPA and grants the attorney the legal authority to act on your behalf.

When Does the Power of Attorney Take Effect?

The timing of when a Power of Attorney takes effect depends on the type. A property and financial affairs LPA can take effect as soon as it is registered, even if the donor still has mental capacity. This flexibility allows the donor to decide when the attorney’s authority begins, either immediately upon registration or when the donor loses mental capacity.

In contrast, a general power of attorney becomes void if the principal loses mental capacity. Enduring Powers of Attorney (EPAs) signed before 2007 can be used before registration but must be registered when the donor starts to lose or has lost mental capacity. Understanding these timelines helps in planning and ensures that the POA takes effect as intended.

Revoking or Changing a Power of Attorney

Revoking or changing a Power of Attorney is possible and sometimes necessary. A donor can cancel a Power of Attorney document or issue a Deed of Partial Revocation to remove an attorney without revoking the entire document. However, to revoke or amend a POA, the donor must have the mental capacity to do so legally.

An attorney can also resign from their responsibilities by formally notifying the donor or the Office of the Public Guardian, depending on the registration status of the LPA. If an attorney is no longer capable or willing to act, they can disclaim their responsibility by completing form LPA 005. The Office of the Public Guardian has the authority to cancel a Power of Attorney if it is being misused.

Common Misconceptions About Power of Attorney

There are several common misconceptions about Power of Attorney. One is the belief that your family member or next of kin can handle your finances if you’re unable to, but without a POA, they likely cannot. Another misconception is that anyone can be an attorney, but the person must meet specific criteria such as being an adult of sound mind and not being bankrupt.

These misunderstandings can lead to complications during critical times. It’s essential to have a clear and legally recognized POA to ensure that your affairs are managed by someone you trust and who meets the necessary qualifications. Debunking these myths helps in making informed decisions and planning effectively.

Summary

Understanding the basics of Power of Attorney is crucial for planning and managing your future. From the different types of POAS to the role and responsibilities of an attorney, this guide has covered all essential aspects. By choosing the right type of POA and the right person to act as your attorney, you can ensure that your wishes are respected, and your affairs are handled smoothly. Take action today to set up a Power of Attorney and provide peace of mind for yourself and your loved ones.

Frequently Asked Questions

What is a Power of Attorney, and why is it important?

A Power of Attorney (POA) is a legal document that allows someone to make decisions on your behalf when you can't. It's important as it ensures your wishes are followed if you can't make decisions yourself.

What are the different types of Power of Attorney I can choose from?

You can choose from three main types of Power of Attorney: General, Enduring, and Lasting Power of Attorney, each serving different purposes and suited to different circumstances.

How do I select a suitable attorney?

Select an attorney who knows you well, is trustworthy, reliable, and has the necessary skills to manage your affairs. Discuss your wishes and preferences with them beforehand to ensure they are willing to take on the role.

When does a Power of Attorney take effect?

A Power of Attorney takes effect based on its type. For instance, a property and financial affairs LPA becomes effective upon registration, while a general power of attorney becomes void when the principal loses mental capacity. Enduring Powers of Attorney signed before 2007 must be registered when the donor starts to lose or has lost mental capacity.

Can I change or revoke a Power of Attorney once it is established?

Yes, you can cancel a Power of Attorney document or issue a Deed of Partial Revocation to remove an attorney without revoking the entire document. It's important that the donor has the mental capacity to make these changes legally. An attorney can also resign by formally notifying the donor or the Office of the Public Guardian.