Planning for the future – what is an LPA and why are they important for family clients?

Losing the mental capacity to make sound decisions about aspects of our own lives is not something any of us like to think about happening. But it is important for clients to plan for the future because, should this scenario occur without any guidance, it can be difficult for their loved ones to help.

A Lasting Power of Attorney (LPA) is the best way to ensure that those people clients would want to make decisions for them have the authority to do so.

Following a recent survey of 2,000 UK residents conducted by consumer campaign group Which?, it has been revealed that there are significant gaps in public understanding of the power of attorney system.

What is a power of attorney and why would somebody need one?

An LPA is a legal document that gives an individual (“a donor”) an opportunity to choose a person or people they trust (“attorneys”) to make decisions on the donor’s behalf if he or she loses mental capacity. There are two types of LPA – one for Property and Financial Affairs and one for Health and Welfare. Anyone over 18 who has mental capacity can make an LPA.

What does “mental capacity” mean in this context?

Mental capacity means somebody is able to understand and make decisions for themselves. In this context, capacity means the donor must understand the process of making an LPA, why he or she is making it and the likely outcome.

What powers does it grant an attorney?

Each LPA “does what it says on the tin”. A Property and Financial Affairs LPA means an attorney can deal with any decisions regarding the donor’s property and finances, including things such as managing the buying and selling of the donor’s property, paying household bills, and managing the donor’s bank account. It is possible for a donor to restrict the types of decisions an attorney can make or the donor can give the attorney authority to make all financial decisions on the donor’s behalf.

A Health and Welfare LPA means an attorney can make health and care decisions such as whether a particular medical procedure is performed, what medication is administered, and what residential care setting the donor lives in. As with the financial LPA, it is possible for a donor to restrict the types of decisions an attorney can make or give the attorney authority to make all decisions on the donor’s behalf. In particular, with the Health and Welfare LPA it is possible for a donor to give the attorneys special permission to make decisions about life-sustaining treatment.

What can’t an attorney do?

An attorney can only act in accordance with the power they have been granted by the LPA. Therefore, if the donor has limited the attorney’s power in any way, it follows that the attorney can only act within the constraints of those limitations. At all times the attorney has a legal duty to act in the best interests of the donor.

What happens if my client has an LPA which appoints their spouse but later goes on to divorce?

If an LPA appoints a spouse and the donor later divorces that spouse, or the marriage is annulled, then the spouse can no longer act as attorney unless the LPA specific states that the spouse can continue acting after divorce/annulment. If no other attorneys or replacement attorneys were appointed by the LPA, then the LPA will come to an end.

If any other attorneys were appointed jointly – rather than jointly and severally – then the divorce will also terminate the appointment of all named attorneys. If the LPA names replacement attorneys then those people will then step in and act as the donor’s attorneys. This may not be what the donor would want – for example, if they had appointed their spouse and two adult children to act as their attorneys on a joint basis and their sibling as a replacement, the divorce would mean that all three “first choice” attorneys’ appointments (i.e. the spouse and the children) would be terminated and the sibling, as replacement attorney, would be appointed instead.

In the scenario above, if the spouse and the children were appointed on a joint and several basis then the divorce will only affect the spouse’s appointment. The children would be able to continue acting as the donor’s attorneys after the divorce and the sibling would only step in if both children could no longer act as the donor’s attorneys, for example if they had lost capacity themselves or died.

What is the position prior to decree absolute?

The provisions in relation to divorce apply only once decree absolute has been granted. It therefore follows that a family client who has previously registered an LPA appointing their spouse will want to make changes to their LPA prior to decree absolute, in order to make sure their LPA arrangements accurately reflect their new wishes until the divorce is finalised.

What happens if my client has an LPA which appoints their unmarried partner but they are now separating?

Unlike divorce or annulment, separation has no effect on an LPA. If you have a client whose LPA appoints their partner but, following separation, the client no longer wishes the partner to act, there is no other option but to revoke the partner’s appointment. If the client’s LPA appoints other attorneys or replacement attorneys and the donor executes only a partial revocation in relation to the partner’s appointment, those other appointments will remain valid. If the LPA only appoints the partner as sole attorney, the LPA will come to an end and the client would need to execute a new LPA.

Can you make changes to an LPA once it has been registered with the Office of the Public Guardian (OPG)?

The changes a donor can make to an LPA once it is registered are limited and any amendments need to be communicated to the OPG. If a donor simply wants to remove one of their attorneys (e.g. their spouse) but wishes for their other attorneys’ appointments to remain valid, they would need to partially revoke their LPA. If a donor wanted to remove all attorneys or “cancel” the LPA – to either make a new one or leave themselves without a valid LPA – they would need to revoke the LPA in its entirety. The OPG requires particular wording to be used for any revocation.

It is not possible for a donor to add further attorneys to an LPA once it is registered so it is important for clients to think carefully about who they would wish to appoint in the first instance and as replacements. In order to appoint new attorneys, the donor would need to revoke the existing LPA and register a new one. Therefore, if your client had previously appointed their spouse as their sole attorney with no replacements but now wished to appoint their children, for example, they would need to revoke their existing LPA and make a new one.

How long does it last?

An LPA lasts from registration until any of the following occurs:

• the donor divorces and the donor’s spouse was appointed as sole attorney with no replacements
• the donor divorces and the donor’s spouse was appointed together with other attorneys on a joint basis and no replacements were appointed
• the donor revokes the LPA in its entirety
• all the attorneys and replacement attorneys have died, lost capacity or do not wish to act
• the donor dies

It is, therefore, important for clients to choose attorneys who will hopefully survive their lifetime as, if there are no living attorneys or replacement attorneys, the LPA can no longer be used.

What’s an enduring power of attorney?

You may come across clients who have Enduring Powers of Attorney (EPAs). These predated LPAs and were replaced by LPAs in October 2007. However, if a client signed an EPA before 1st October 2007, it should still be valid. An EPA deals with decisions only about property and financial affairs (i.e. not health and welfare decisions). Similar to an LPA, it can be used by the attorney while the donor retains capacity or after they have lost capacity, provided it is registered.

Unlike with LPAs, the Enduring Powers of Attorney Act 1985 makes no provision for a situation where the donor appoints their spouse as their attorney but they later go on to divorce. Therefore, if you have a client who appointed their spouse as their attorney under an EPA they should explicitly revoke the EPA and make a new LPA appointing others to act as their attorney(s).

The Tax, Trusts and Estates team at Irwin Mitchell are there to help clients with any LPA queries. For more information, contact them here.