Why we all need a Lasting Power of Attorney
The TV presenter, Kate Garraway's tragic situation highlighted that certain paperwork shouldn’t just be a priority for the elderly.
An interview Kate Garraway gave several months ago about her husband Derek Draper's year-long battle with COVID has been well publicised. She explained that the challenging and devastating circumstances the family found themselves in had been added to by the complications that came from her husband not having made a Lasting Power of Attorney (LPA).
During the interview Kate Garraway highlighted the problems this caused, including that she couldn’t access her husband's bank and credit card accounts or even their joint savings, nor refinance their mortgage to raise much needed funds to help him and their family. The knock-on effect of not being able to deal with his finances was so serious that she had to rely on friends for financial support.
Many people assume that they would automatically gain control of their spouse or family member's finances in the event they lose capacity, whether this be temporary or permanent. However, this is not the case: an LPA is required.
What is an LPA?
An LPA is a legal document which allows you to appoint one or more people, called your 'attorneys', to make certain decisions for you. There are two types of LPA, one relating to property and finances and the other to health and welfare. You can make either or both.
Health and Welfare LPA
A Health and Welfare LPA gives your attorney(s) power to make decisions on your behalf covering a wide range of matters from where you would live, to decisions about your medical treatment. However, your attorney(s) can only act where you lack the capacity to take a particular decision. In this article we concentrate on Property and Financial Affairs LPAs.
Property and Financial Affairs LPA
A Property and Financial Affairs LPA gives your attorney(s) wide ranging powers. In effect, subject to certain limitations, either imposed by you or by law, your attorney(s) can make all decisions about your financial affairs that you can make, including selling your home, paying your bills and investing your money. Unless you have said in your LPA that your attorney(s) can only act if you lack capacity, they can act on your behalf even while you have capacity.
What if you don’t have a Property and Financial Affairs LPA?
If you become unable to manage your finances and haven't made an LPA, it will be necessary for someone to make an application to the Court of Protection (the Court) for an order appointing a Property and Finance deputy. The person making the application will need to submit certain, quite complex, prescribed forms providing details of the incapacitated person's known assets and liabilities, together with other information such as whether or not they have made a Will and details of family members and other people with an interest in the application. They also have to provide personal details and confirm that they will abide by the requirements of the Court if they are appointed as a deputy.
The paperwork may also need to be served on other people, such as children or siblings, so that they can make their own representations if they think someone other than the applicant should be appointed as a deputy.
A medical certificate confirming the lack of capacity to manage finances completed by a suitably qualified medical professional is also required.
The Court currently charges £365 to apply for a deputy to be appointed, a £100 assessment fee for a first time deputy and a subsequent supervision fee of between £35 and £320 a year. It is also a requirement that a deputy take out an insurance bond with annual premiums being paid from the incapacitated person's assets.
Although anyone can apply to the Court for an order appointing them as deputy, it is the Court which decides who should act as a deputy and dictates the scope of the powers the deputy will have. In the case of a disputed application, where family or friends are in disagreement about who should act, it is the Court who will decide. The Court may also appoint from its panel of professional deputies particularly where there are such disputes.
The process of applying for the appointment of a deputy is not only costly but also time consuming and it can take up to a year before assets can be made available on the appointment of the deputy. The deputy also needs to file an annual report detailing all financial transactions. The deputy is expected to deal with all financial matters, such as ensuring claims are made for any entitlement to state benefits and/or where necessary, arrange for income tax returns to be completed, even though such matters are not spelt out in the Court order.
Attorney versus deputy
Here are some key differences:
- An application to the Court for an appointment of a deputy is time-consuming, whereas if you make an LPA and it has been registered with the Office of the Public Guardian (OPG), it can be used immediately, when required
- If you make an LPA you choose your attorney(s), including one or more replacements if any of the original attorneys become unable to act. Where there is no LPA the Court decides who will make decisions for you and only rarely is more than one person appointed
- A deputy is supervised by the OPG which is effectively an administrative arm of the Court. The deputy is required to file annual reports with the OPG which checks that everything is in order. An attorney does not need to file an annual report with the OPG and there is no direct annual supervision by the OPG. However, the OPG can supervise attorneys and where necessary recommend to the Court that attorneys are removed and replaced by a deputy
- As there is no supervision of attorneys by the OPG, there are no annual fees to be paid and no requirement to pay for a bond
- The scope of the attorney(s) powers are set out in the LPA and the relevant legislation. The attorney(s) can act relatively freely whereas a deputy is only authorised to carry out work permitted by the Court For example, if it becomes necessary to sell the incapacitated person's home, a deputy will have to make an application for a Court order, which can take several months to obtain and again, can be costly
- If you have a business you can appoint different attorneys to make decisions about your business and your personal general financial affairs. Although more than one deputy can be appointed, this is less common and decision taking can be delayed by the need to get the Court's permission
- Although we would recommend that attorneys keep records of financial transactions so that it is easier to provide evidence should any questions arise, there is no legal requirement that they do so unless specified in the LPA itself. By contrast, a deputy has to keep prescribed accounts and file them on time with the OPG every year. There are no exceptions to this
- As Property and Financial Affairs LPAs can be used by the attorney(s) once registered, this means the attorney(s) can act even where the maker of the LPA still has capacity (unless stated otherwise in the LPA). This can be useful, for example where the maker of the LPA becomes severely physically incapacitated. By contrast a deputy can only be appointed once a person has lost capacity
- Both attorneys and deputies need to apply to the Court for an order authorising gifts which are outside the usual birthday, Christmas presents etc. However, the maker of an LPA can, either in the LPA itself or in a side letter, indicate under what circumstances they would like such gifts to be made and if they wish to restrict the amount, which can help the Court when reaching a decision whether to authorise the making of gifts
- Neither an attorney nor a deputy is able to make a Will for the incapacitated person but it is possible for an application to be made to the Court for what is called a 'statutory will' when the incapacitated person does not have a Will or it is thought that changes need to be made to their existing Will.
A lot of people assume that making an LPA is only essential for older people. But Kate Garraway's story demonstrates that this is far from the case. If you haven’t made an LPA you should treat this as a priority, and as Helen Tavroges' article demonstrates, there is a lot more to this than simply filling in a form!