Everything You Need to Know About Powers of Attorney
Everything You Need to Know About Powers of Attorney
Deciding when the time is right to set up a Power of Attorney (POA) can be difficult. This legal document enables someone to make decisions on your behalf, provided you are no longer able to or wish to. The agreement may be temporary but often the circumstances which instigate the need to set up a Power of Attorney can be for your long-term best interests.
Having arrangements in place for if you’re no longer able to make your own decisions is an important part of futureproofing. Even if you still have mental capacity, it can be much easier to prepare in case you lose the ability to make your own decisions in the near future.
This guide will outline all you need to know about Powers of Attorney in the UK. Read on for information on the distinct types available, associated costs, usage and revocation rules, alternatives, and expert advice on putting your POA papers in impeccable order.
What are the Different Types of Power of Attorney?
There are several different types of lasting or enduring POA arrangements you can put in place in preparation for the future. Some Power of Attorney arrangements may call for Lasting or Enduring Power of Attorney, and others may require a general overlook involving a mixture of both.
It’s important to understand the key differences between the various types of POA:
Ordinary Power of Attorney
This provides authority for attorneys to make financial decisions on your behalf as and when needed. It can provide cover for a temporary period – for example, if you are on an extended holiday or are in hospital for a long time – or it can be initiated on a permanent basis if you want someone to act on your behalf.
Lasting Power of Attorney (LPA)
This covers decisions about your financial affairs, bills, property, probate, and medical treatment. It comes into effect once you lose mental capacity or if you no longer want to make decisions for yourself.
Enduring Power of Attorney (EPA)
EPAs were replaced permanently by LPAs in October 2007. If you created and signed an EPA before 1 October 2007, it will still be valid. EPA agreements cover property and financial decisions, coming into effect once you lose capacity, or if you instructed someone to act on your behalf permanently before this date.
When making an LPA, you can choose to appoint the same or different attorneys for health or welfare matters and financial or property matters.
LPA for Financial Decisions
This can be used while you still have capacity or come into effect once you lose capacity. This will cover decisions related to buying and selling property, repairs, investments, bill payments and mortgages. Attorneys must keep accounts and separate their own funds from yours, with details available to be sent to appointed family members or solicitors if mental capacity is lost.
LPA for Health Decisions
This can only be used once you have lost mental capacity, with attorneys making decisions related to your health and care. This includes where you live, what you eat, who you have contact with, what social activities you should participate in, and so on. You can give specific permissions for your attorney to make decisions about life-saving treatment.
How Much Does Setting Up a Power of Attorney Cost?
Setting up a Lasting POA involves a one-off upfront fee that covers the registration with the Office of the Public Guardian, which is £82 per agreement. Therefore, if you register an LPA for property affairs and an LPA for health affairs then you will pay £164.
You may also need to factor in professional fees for a solicitor to advise and witness the form signatures. This typically ranges from £150-£200 plus VAT, depending on your chosen firm. This isn’t legally required but any costs incurred by solicitors will be your own to pay, separate from the LPA registration form.
Overall, expect to budget £400-£500 per POA document including legal fees and the registration cost.
What are the Rules and Requirements for POAs?
There are strict legal requirements surrounding Power of Attorney documents:
- The donor must be 18 or over and have mental capacity when signed.
- Attorneys must be 18 or over, not bankrupt, and mentally capable of making decisions.
- A certificate provider watches you sign and certifies you understand the POA.
- POA forms require your signature, attorney’s acceptance, and witness signatures.
- Lasting POAs must be registered with the Office of the Public Guardian before use.
- Attorneys must follow the Codes of Practice and make decisions with your best interests at heart.
When Does a Registered LPA Become Active?
A registered Lasting Power of Attorney only takes effect once you have lost mental capacity. If you still have mental capacity, you retain full authority to make your own decisions about your health, care, property, and finances.
Your chosen attorney(s) cannot use the powers granted in an LPA agreement unless your mental capacity is starting to deteriorate. A family member, relative, doctor or even the attorney themselves are usually responsible for making the first assessment of your mental capacity diminishing.
Can You Revoke a Power of Attorney?
You can revoke a lasting or enduring POA at any time provided you still have mental capacity.
This is done by:
- Notifying your attorneys in writing that their POA is revoked.
- Completing a deed of revocation and registering this with the Office of the Public Guardian.
- Destroying copies of the existing registered POA documents.
Is Deputyship a Suitable Alternative?
If you become mentally incapacitated but have made no POA, the Court of Protection can appoint a deputy to manage your affairs. This offers an alternative but involves greater time and costs compared to having a prepared POA in place.
A deputy will need to regularly submit reports to the Office of the Public Guardian to evidence they are acting responsibly. An upfront security bond may also be required.
How Should You Get Your POA Papers in Order?
To ensure your affairs are in order, it is highly recommended that you conduct the following tasks:
- Carefully select attorneys you trust fully for all scenarios.
- Discuss your wishes with attorneys to ensure they understand your expectations and wishes once mental capacity is lost.
- Store certified copies of POA documents securely with your solicitor or trusted personal advisor(s).
- Keep ongoing powers separate from those only taking effect upon incapacity.
- Review any existing EPAs to see if replacements are recommended.
- Check for validity if a POA is several years old.
- Keep certified copies of deeds of revocation just in case.
- Destroy any unused copies of revoked POAs.
- Inform key contacts like banks if you register or revoke a POA.
Tailored Professional Advice from Trusted Accountants
Powers of Attorney enable trusted attorneys to make decisions on your behalf during periods when you have diminished mental capacity. Having arrangements in place provides significant peace of mind.
Over the course of your working life, you may have set up trusts and have accrued various assets. Understanding all the tax liabilities and benefits that you – or your beneficiaries – are entitled to can be complex, and it’s possible that your chosen LPA may not be aware of all the tax liabilities owed following your loss of mental capacity or your passing. The financial administration of estates, funds, and assets can be difficult and time-consuming. However, our specialist estate planning advisors can offer practical advice and assistance with getting your POA agreements in order.
Hamlyns provides probate accountancy and will writing services that are designed to enable seamless and timely distribution of estates in accordance with your wishes. Get in touch to discuss your options or receive answers to any other questions or concerns you may have. Our team is always on hand to ensure proper provisions are made.
Patrick Collins
Tax Director
