In such uncertain times as these, it is more important than ever to make sure that as many people as possible, particularly those who are elderly and vulnerable, have appropriate safeguards in place to protect and help them in difficult periods. One such safeguard is to appoint one or more trusted people, who can step in and assist with financial affairs when someone becomes unable to manage these, either through mental incapacity or simply through an inability to get out and about, and a limited facility with modern communication methods.
General powers of attorney and lasting powers of attorney can be very valuable in both these scenarios. General powers of attorney can act as a “stopgap” where someone is shielding or finding it difficult to get about, allowing friends or relatives to help out on a temporary basis. Lasting powers of attorney are vital to protect people in the longer term.
It is easy to assume that loss of mental capacity only happens to other people, or at least that it is something to think about in the misty future, but this is an issue which can affect anyone, at any age. Early onset dementia, a road traffic accident, a sudden illness - there are many reasons why loss of mental capacity can take people unawares and unprepared.
Mental incapacity can be temporary or permanent. Either way, it can involve the sufferer’s relatives and friends in a morass of problems at a very difficult time. Putting in place Lasting Powers of Attorney (“LPA”s) in good time can reduce the problems to a manageable level, whilst ensuring that the people chosen by the sufferer are the ones with the power to step in and manage things on his or her behalf.
The attorneys have an overriding duty to act in the best interests of the person who appointed them (“the donor”). They also have a duty under the Mental Capacity Act 2005 and associated code of practice to help the donor to make their own decisions wherever possible, and to take into account their thoughts and wishes when making decisions on their behalf.
Health and Care Decisions
An LPA for Health and Care Decisions allows the attorneys to make decisions about the medical treatment and social care required by the donor. It allows the attorney or attorneys to “step into the shoes” of the donor and make such decisions on his or her behalf. The Health and Care LPA will only ever come into effect if the donor is unable to make their own decisions about their personal care and medical treatment.
If the donor wishes, the attorneys can also be given the power to give or withhold consent to “life sustaining treatment” on behalf of the donor. This would cover matters such as whether the donor should be resuscitated, and whether chemotherapy in a case of terminal cancer would or would not be in the best interests of the donor. Some donors elect to give this authority to their attorneys, where others prefer to leave the decision up to the medical profession.
An LPA for Financial Decisions confers on the attorneys the authority to deal with the donor’s property and financial affairs. The attorneys can access funds from the donor’s bank accounts and savings, manage their investments, and pay their expenses. If necessary or desirable, they can sell the donor’s property to raise money to meet the donor’s needs. Attorneys can open a special bank account for the donor, or can manage the donor’s own bank account to receive income and pay the donor’s expenses. This type of LPA can come into effect immediately it has been made and registered, or only when the donor loses capacity, and this is a choice made by the donor at the outset.
There are only very limited powers to make gifts with the donor’s property. These are set out in statute, and cannot usually be increased by the donor, even while they still have mental capacity. When considering making gifts with the donor’s money, legal advice should be obtained in order to protect the attorneys from any claims against them personally for breach of their powers and duties.
Where no LPA for Financial Decisions is in place, relatives or friends need to make an application to Court for a Deputyship Order, to give them the power to deal with the sufferer’s finances and access funds to pay their expenses. This is a lengthy, complicated and expensive procedure, leaving the sufferer’s affairs in limbo for some months, and a Deputy has ongoing reporting responsibilities to the Court. A Deputyship also gives the sufferer no control over who takes over their financial affairs.
Another area to consider for business owners is decision-making for their business affairs, if they lost capacity to deal with these themselves. It is common to appoint different attorneys for business affairs than for personal finances, and to include more guidance and instructions in the LPA as to how the business affairs should be managed. For anyone with an owner-managed business, it would be advisable to consider what would happen to their business if they suddenly lost mental capacity, and to put measures in place in good time to cover this possibility.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.