PASSING ON YOUR WEALTH

Power of Attorney Q&A

  • 16 February 2021
  • 10 mins

On Tuesday 2 February, we produced a webinar addressing the frequently asked questions associated with Power of Attorney. The speakers joining our Senior Investment Writer and Analyst, David Ryder, were Mark Mulcahy and Gareth Wisdom. Mark is one of our most experienced advisers and is qualified to help investors with later-life issues. Gareth is a Partner at Hugh James Solicitors where he heads the Wills and Estate Planning division.

What is Power of Attorney?

According to Age UK’s page on power of attorney:

Power of Attorney allows one or more people (those holding the power of attorney) to make decisions on someone else’s (the donor) behalf. Depending on the powers granted, the attorney(s) can make financial and health-related decisions on behalf of the donor. This can be a temporary or an ongoing arrangement.

What are the different types of Power of Attorney?

Ordinary power of attorney

This covers decisions about your financial affairs and is only valid while you have mental capacity. It is suitable if you need cover for a temporary period (hospital stay or holiday) or if you find it hard to get out, or you want someone to act for you.

Lasting power of attorney (LPA) (England and Wales)/ Power of attorney (Scotland)

(i) For financial decisions

This can be used while the donor still has mental capacity (e.g. hospital stay or holiday), or the donor can state that it is only to come into force if the donor loses mental capacity. It can cover such things as buying or selling property, investing money, paying the mortgage and paying bills.

(ii) For health and care decisions

This can only be used once the donor has lost mental capacity. It can entail decisions about the donor’s medical care, diet, social contact, and where the donor should live.

Enduring power of attorney (EPA)

EPAs were replaced by LPAs in October 2007. However, if you made and signed an EPA before 1 October 2007, it should still be valid, according to Age UK. An EPA covers decisions about your property and financial affairs, and it comes into effect if you lose mental capacity, or if you want someone to act on your behalf.

What is meant by “mental capacity”?

Quoting again from Age UK’s website, “Mental capacity means the ability to make or communicate specific decisions at the time they need to be made. To have mental capacity you must understand the decision you need to make, why you need to make it, and the likely outcome of your decision.”

Who can be appointed Power of Attorney?

Anyone aged over 18 who has not been bankrupt. But, it’s imperative that the donor chooses one person or persons in whom they can have absolute trust.

How many attorneys can be granted power?

The donor can appoint one or more people the power of attorney. If there are more than one for a given power (financial or health), then the donor can appoint them to do everything together “jointly”, or appoint them to act together or individually “jointly and severally”.

What is the process of creating power of attorney?

Decide what powers the donor wants to appoint. You can do this yourself, but we strongly believe that this is best done with the advice of a professional solicitor who specialises in power of attorney work. This is because they are likely to have insight into many of the eventualities that might not occur to someone starting out on the power of attorney path for the first time.

When the document is agreed and approved by donor and attorney(s) alike, it needs to be sent to the Office of Public Guardian (OPG), the government agency that records and approves power of attorney agreements.

A power of attorney agreement is not valid and cannot be used until the OPG confirms that it has been registered.

How long does it take to produce a power of attorney?

The time will vary depending on a range of factors such as how much discussion is required, how many attorneys are involved, how many financial or health considerations are being taken into account, and if you choose to use a law firm to help with the process.

Gareth Wisdom is a partner at Hugh James Solicitors and head of the firm’s Wills and Estate practice. During the webinar on power of attorney that we produced, he estimated that the process of producing the documentation takes around 10 working days.

Having been agreed and signed, the documentation needs to be sent to the Office of Public Guardian which can take between six and 12 weeks to confirm registration. This will be delayed if the paperwork has not been submitted correctly.

What are the responsibilities of the attorney?

The over-riding responsibility is to make decisions in the best interests of the donor, and this must be done confidentially. What this entails in practice will depend on the restrictions that have been imposed in the document. For example, if the donor has written a will that bestows a property to a family member, then the power of attorney document should note this and restrict the attorney from selling the property in order to pay for the donor’s on-going health needs.

Should the power of attorney be constructed in conjunction with the donor’s will?

Yes. As the point above demonstrates, the attorney might act in the best interests of the donor by selling a property to pay for later-life care. But if that property has been bestowed to someone in the donor’s will, then the attorney might be acting in the best interests of the donor but simultaneously contradicting their previous wishes.

What happens if you leave it too late to appoint a Power of Attorney?

If an individual has lost mental capacity then it is too late to appoint an attorney. Instead, it is possible for an application to be made to the Court of Protection for a deputy to be appointed. Generally speaking, this is often a more complicated process which takes longer and can cost more money to complete.

At what age should you consider arranging power of attorney for yourself?

Both Mark and Gareth agreed that arranging a will and power of attorney are things that should be done as soon as you turn 18. Their thinking is simple: the two documents are most effective when done together. The power of attorney is a document that you can get sorted and keep on file. You hope never to need it, but it’s there if you do say in the event of an accident or illness.

Does Power of Attorney take effect as soon as it’s registered?

Not necessarily. It is only valid after being registered but, when dependent on the donor losing mental capacity, the power to make decisions to act on the donor’s behalf only transfers to the attorney once the donor has been confirmed as having lost mental capacity.

How is it decided that the donor has lost mental capacity?

“Assessors” decide whether or not someone has lost mental capacity. These can include family members, care workers, a nurse, a doctor or a social worker.

According to the Care Quality Commission’s guidance on the Mental Capacity Act, the code of practice includes an important “two-stage test of capacity”:

1. Is there an impairment of, or disturbance in, the functioning of the person’s mind or brain?

If so:

2. Is that impairment or disturbance sufficient that the person lacks the capacity to make a particular decision?

A person lacks capacity to make a particular decision if they cannot either:

  • Understand information relevant to the decision, or

  • Remember the information long enough to make the decision, or

  • Weigh up information relevant to the decision, or

  • Communicate their decision – by talking, using sign language, or by any other means.

Can Power of Attorney be cancelled?

It can be cancelled at any point while the donor maintains mental capacity. However, cancellation requires a formal revocation, you cannot simply alter the original lasting power of attorney. Again, this is something that, we believe, is best done with professional advice from an appropriately experienced solicitor.

Does the donor lose control?

This is one of the biggest fears that people have. Mark and Gareth both felt that this was largely unjustified. Firstly, the donor chooses who the attorneys will be, and they can choose multiple attorneys and decide if they have to work together on all decisions.

Secondly, the power of attorney only kicks in once the donor has lost mental capacity i.e. effective control of decision-making in their own best interests.

Thirdly, the attorneys are obliged to act in the donor’s best interests.

How does Power of Attorney apply to gifts?

Everything that the attorney does must be in the best interests of the donor. For example, an attorney might understand that the donor wanted to provide for their grandchild’s university fees. Providing the donor’s health and well-being are appropriately catered for and other priorities are being taken care of in accordance with the power of attorney document, then the attorney might be in a position to make a gift on the donor’s behalf.

It all comes back to the original agreement and further emphasises the need for the donor and attorney(s) to engage in thorough discussion when drawing up the agreement. This is another reason why we would always recommend professional legal advice from an appropriately experienced solicitor.

Who polices the actions of the attorneys?

There isn’t a body that polices the attorneys’ actions. Again, this emphasises the importance of choosing a trustworthy attorney.

The Office of the Public Guardian can provide guidance on action that can be taken if the attorney’s action are cause for concern.

What surprises people about the need for power of attorney?

Mark noted that many people are quite surprised at the mundane but essential value of power of attorney. For example, the bank, electricity companies, investment companies and the like are bound by a duty of care which requires that they can only discuss an account with the account-holder or the person authorised to act on that person’s behalf.

So if the attorney needs to see how the donor’s bank balance is looking with a view to buying, say, an electric wheelchair, the bank will insist on seeing the original Power of Attorney document or a solicitor-certified copy along with personal identification from the attorney, such as a passport.

Once those documents have been provided, the bank will review the document to make sure that what the attorney is requesting is within the terms of the power of attorney document. Once all of that is confirmed, the bank will share the appropriate information with the attorney.

By way of example, if the power of attorney is not in place, the people trying to act on behalf of the person who has lost mental capacity, might face considerable challenges in such simple acts as paying the gas bill.

What is the documentation that an appointed attorney must present when using their power of attorney?

The original power of attorney document itself or a copy certified by a solicitor along with proof of identity such as a passport.

Can the attorney claim expenses?

The attorney can claim legitimate expenses incurred in the process of serving the donor’s best interests. For example, travel, stationery or professional assistance in, say, submitting the donor’s tax returns.

Can the attorney delegate some or all of the responsibilities?

The attorney is obliged to make decisions on behalf of the donor, and to do so confidentially. Where that entails getting specialist professional advice, such as delegating investment decisions or taking legal or tax advice, that’s fine. What the attorney may not do is pass decisions on to non-attorneys that they, the attorneys, should be making themselves. That’s pretty much everything that does not require specialist professional knowledge.

Important information

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In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.

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