Who will manage your property and finances if you fall ill?

Manage finances
It’s a common misconception that if you should become incapacitated, your spouse, civil partner or cohabiting partner can manage your financial affairs for you. This is simply not true, and in such circumstances accounts (even joint accounts) can be frozen whilst an order is granted by the Court. Such orders are expensive and can take months to obtain.

The solution is simple: every adult should have a Financial Decisions Lasting Power of Attorney in place. If you haven’t already made this important document but you’re worried about leaving your home because of the Coronavirus (COVID-19), please call us on 0800 788 0500 or email info@aprilking.co.uk ask us for a Direct Appointment without obligation. These appointments are conducted over the phone or by video link.

In this article we explain more about the Financial Decisions LPA, what it covers and the choices you have when making one.

What is a Lasting Power of Attorney?

A Lasting Power of Attorney (LPA) allows you to nominate a trusted person to help you make decisions. These documents were introduced by the Mental Capacity Act 2005 and they replace Enduring Powers of Attorney (EPAs). EPAs validly created before 1st October 2007 can still be used.

There are two types of LPA:

  • An LPA for health and care / welfare decisions
  • An LPA for decisions about finances and property

All adults should have both types. If you don’t have these and you lose capacity, the only option is for someone to apply to the Court for a Deputyship Order – an expensive and time consuming process.

In this article we focus on the Financial Decisions LPA. If you would like to read more about the Health and Care LPA, click here.

A Financial Decisions LPA can be used as soon as it has been registered, with your permission. This makes it a very useful document in the event that you are temporarily incapacitated (for example, during a hospital stay). By contrast, a Health and Care LPA can only be used once you lose capacity.

Can I make a Financial Decisions LPA?

To make a Financial Decisions LPA, you must:

  • Be aged 18 or over
  • Have ‘mental capacity’

A person lacks mental capacity in relation to a matter if,

“at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain. It does not matter whether the impairment or disturbance is permanent or temporary.” 

Mental Capacity Act 2005, Section 2

Mental capacity is always assessed in relation to a particular decision. So, for example, just because someone lacks the mental capacity to manage their own finances, doesn’t necessarily mean they can’t make an LPA.

Who should I choose to be my attorney?

You can choose anyone to be your attorney who:

  • Is aged 18 or older
  • Has mental capacity

You cannot choose:

  • An undischarged bankrupt or a person subject to a debt relief order can’t be an attorney for a Lasting Power of Attorney for Property and Financial Affairs but they can still be your attorney for the Health and Care Decisions LPA.
  • People who are on the Disclosure and Barring Service’s barred list cannot act as an attorney – unless they’re a family member and they’re not getting a fee to be your attorney. They will break the law if they do. Find out more about this by clicking here.

Many people will choose to appoint their spouse, civil partner or cohabitee. You may have more than one attorney, although consider that the more you have, the more difficult it can be for the attorneys to carry out their duties.

Sometimes people decide to appoint all of their children, not wanting to leave one out in case of ill feeling. But in all cases, you should consider whether each person has the necessary skills to manage your finances and property on your behalf.

How will my attorneys act for me?

If you appoint multiple attorneys on your Financial Decisions LPA, you will need to decide how you want them to act for you.

They can act:

  • Jointly – they must make every decision as to your finances and property together
  • Jointly and severally – they can make decisions together but they can also act independently
  • Jointly for some matters, severally for others

People sometimes worry here about allowing attorneys to act independently. However, it’s important to appreciate that if you lose capacity, there are a lot of little day-to-day financial decisions which need to be made. For example, your attorneys might need to arrange for your garden to be tidied, or for a small gift to be purchased for a grandchild. Do you really want your attorneys to have to consult each other for every single little thing?

The solution to this is to appoint the attorneys jointly for some matters, severally for others. The day-to-day decisions can then be taken as and when needed by the most appropriate person. Any major decisions, such as selling your house or investments, can be made jointly. Note that you can also specify in the instructions section of the LPA that your attorneys must consult a third party before making a decision. Additionally, you can specify in the preferences section of the LPA which matters the attorneys should take into consideration when making decisions.

What if my attorneys cannot act for me?

You can appoint replacement attorneys in your LPA, in case one of your attorneys is unable or unwilling to act.

If you’ve appointed your original attorneys ‘jointly’ and one cannot act, all of the replacements will replace all of the originals. You could however include a provision that reappoints the surviving joint attorney to act alone, should the other no longer be able to act.

If you’ve appointed the attorneys to act jointly and severally, any replacement attorney will simply replace the original attorney who cannot act.

What does a Financial Decisions LPA cover?

A Financial Decisions LPA covers decisions relating to finance and property. It might cover, for example:

  • buying or selling your property
  • opening, closing or operating any bank, building society or other account for you
  • giving access to your financial information
  • claiming, receiving and using (on your behalf) all benefits, pensions, allowances and rebates (unless the Department for Work and Pensions has already appointed someone and everyone is
    happy for this to continue)
  • receiving any income, inheritance or other entitlement on your behalf
  • dealing with your tax affairs
  • paying your mortgage, rent and household expenses
  • insuring, maintaining and repairing your property
  • investing your savings
  • making limited gifts on your behalf
  • paying for private medical care and residential care or nursing home fees
  • applying for any entitlement to funding for NHS care, social care or adaptations
  • using your money to buy a vehicle or any equipment or other help you need
  • repaying interest and capital on any loan that you have taken out (Source: Mental Capacity Act Code of Practice)

The above list is not exhaustive.

Must my attorneys take my beliefs and feelings into account when acting?

Your attorneys have a duty under the Mental Capacity Act to act in your best interests. Therefore, they cannot simply substitute what they would normally do with what you would normally do!

When reaching a decision as to what is in your best interests, an attorney must (amongst other things):

  • Encourage your participation: try to get you involved as far as possible in the decision making process. Remember that mental capacity is decision specific. The fact that you can’t manage your bills and finances does not necessarily mean you can’t pick out a great present for your grandkids!
  • Identify all relevant circumstances: look at what you would have considered if making the decision on your own.
  • Find out your views on relevant matters: this would include your past and present feelings, which you might have spoken to your attorneys or another person about. It might also include your religious, cultural, moral and political beliefs.
  • Consider whether you might regain capacity: if you have lost capacity temporarily, they should consider whether it might be appropriate to delay the decision until you can make it yourself.
  • Consult others: speak to other people for their views on what would be in your best interests. They may also be able to find out more about your wishes, feelings, beliefs and values.

They must not simply do what they think is best, based on their own views and beliefs.

Can my attorneys purchase gifts on my behalf?

Unless you restrict them, attorneys can make gifts to persons (including themselves) who are related or connected to you. These may be made on birthdays, weddings and other occasion where people customarily gift presents.

They may also gift to charity if you previously did this, or might have been expected to.

All gifts they make must be reasonable, taking into account all circumstances. Any gifts that fall outside of these parameters would need to be approved by the Court of Protection.

Can my attorneys run my business?

Whether or not your attorneys can use the Financial Decisions LPA to run your business depends on the type of business you have, how it is established (for example, the contents of a Limited Company’s Articles of Association or a Partnership Agreement), and whether you place any restrictions in the LPA.

Most business owners will choose to make a separate business LPA, appointing people suited to handling their commercial affairs. Find out more about business LPAs here.

What can I write in the instructions section of the LPA?

You can use the instructions section of the Finance LPA to limit the powers that your attorneys have. You could, for example, specify that your attorneys cannot act until you lack capacity and then include an instruction on how capacity should be assessed. Or you could limit or restrict altogether your attorneys’ powers to make gifts. You could further specify that your attorneys must consult with a third party when making a particular decision, or must submit accounts to a third party.

If you have two attorneys and you’ve appointed them jointly, you can also specify here that should one be unable to act, the other can continue (contrary to the default position). This prevents the situation where if one cannot act, both attorneys are replaced by your replacement attorneys. Past case law has provided suitable wording to put this into effect.

A further provision you might want to include is to set out the circumstances under which your Attorneys may see a copy of your Will. If there is no provision here, the Attorney is entitled to a copy of the Will unless the solicitor holding it has cause for concern.

It is important that Attorneys are able to consider your Will when managing your finances. If, for example, your Attorneys need to sell some of your investments to pay for something that you need, it would help them to know that you have left shares in Company X to Grandchild A and shares in Company Y to Grandchild B. They could sell 50% of each holding, rather than selling just one of the holdings and effectively disinheriting one of your grandchildren.

Note that your Attorneys cannot make a new Will for you. If you haven’t made a Will or there is good reason why your existing Will needs to be amended, they would need to apply to the Court for a Statutory Will.

Instructions must be drafted carefully – they must be straightforward, easy to understand and capable of being put into practice.

What is the preferences section of the LPA for?

The preferences section of the LPA is where you can put your wishes and feelings about certain matters. Anything written in here is not binding per se, but remember that your Attorneys have a duty under the Mental Capacity Act to take your views into account. They can only therefore ignore your preferences if they have good reason.

You might write, for example,

“I have banked with Bank XYZ for 30 years and I would prefer my accounts to be held with this bank.”

As this is only a preference, your attorneys can act differently if doing so was in your best interests (for example, if Bank XYZ fell into financial difficulty).

Can I make a Finance LPA myself?

Whilst in theory you can make a Finance LPA yourself, there are a lot of potential pitfalls. The OPG have revealed the biggest errors they see are:

  • Using the wrong form
  • Mixing up names and details
  • Being vague
  • Making the unlawful compulsory
  • Including instructions that don’t belong on a Finance LPA
  • Including contradictions
  • Missing out pages
  • Missing out signatures
  • Signing in the wrong order
  • Using pencil or tippex

It’s important to appreciate that just because the OPG accepts and registers your LPA does not mean it will operate as you intended. People are very often confused on the way attorneys and replacement attorneys are appointed; and on how to draft instructions. This can render the LPA useless, or result in a time-consuming and expensive application to the Court. It is therefore best to use an experienced lawyer to assist you in drafting your Finance LPA.

Once I have made my LPA, what happens next?

Once the LPA is made, it must be registered as soon as possible with the Office of the Public Guardian (OPG). The LPA cannot be used until registered (remember that it can only be used once registered with your permission, or if you have lost capacity). Registration can take a number of weeks, due to the capacity of the OPG. It is therefore wise to start the process as soon as possible.

Call us on 0800 788 0500 or email info@aprilking.co.uk ask us for a Direct Appointment to discuss making a Lasting Power of Attorney for Finance and Property, without obligation.

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