Lasting Power of Attorney – Coping with Dementia

Lasting Power of Attorney

Please note that while every effort has been made to ensure this article's accuracy, it clearly isn't legal or financial advice tailored to your individual needs. You must always Do Your Own Research (DYOR). Links for further reading are included at the bottom of the article.

If you still need advice after reading these, please contact an IFA and / or a solicitor. Any action you take on the basis of this article is at your own risk, with no responsibility or liability assumed by 7 Circles.

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Today’s post is about the Lasting Power of Attorney, which can be used to help people manage their affairs when they fall ill, or their mental capacities diminish.

What is a Power of Attorney?

In the light of –

  1. the recent “dementia tax” row about social care costs, and
  2. the news that dementia is now the leading cause of death in England and Wales –

this seems like a good time to look at what you can do to ensure that dementia doesn’t disrupt the financial plans of you and your family more than it needs to.

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A Power of Attorney (PoA) is part of the statutory framework within the Mental Capacity Act, which is designed to protect people with impaired mental capacity.

  • Mental capacity is the ability to make and communicate decisions at the time they need to be made.
  • You must understand the decision you need to make, why you need to make it, and the likely outcome of your decision.

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The PoA identifies who should make decisions on the donor’s behalf – this person is known as the attorney.

  • It also provides a framework of principles to be used when making these decisions.

Generally the attorney should be younger than the donor – the donor’s children are a popular choice.

  • But many couples start by granting each other PoA.

By 2015, there were 441K PoA arrangements registered in the UK.

  • The average age of a donor at the time of registration is now down to 75.
  • The total number of outstanding PoAs is now over two million.
Lasting Power of Attorney

There are three main flavours of Power of Attorney (PoA):

  1. normal (also known as ordinary or general),
  2. lasting and
  3. enduring.

The Ordinary or General PoA is valid only when the donor still has mental capacity.

  • It’s used on a temporary basis when the donor needs to go into hospital, or will be away from home for some time (or finds it difficult to leave their home), and needs someone to manage their affairs.

The most commonly used on these days is lasting power of attorney (LPA).

  • The Enduring Power of Attorney was the common term until 2007, when LPAs replaced them.
  • EPAs only deal with money.
  • Any EPA agreements signed before then are still valid, but new agreements will refer to the LPA.

We’ll use the abbreviations OPA, LPA and EPA to distinguish the three options where necessary, but the generic term PoA will be used below to stand for an LPA.

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There are two further sub-divisions to consider:

  1.  health and welfare (a medical PoA, otherwise known as “personal welfare”), which covers what care and treatment you might need
  2. property and financial affairs (a money PoA)

The former can only be used when the donor lacks personal capacity, whereas a money PoA can be used to assist a donor who retains some or all capacity.

  • Most PoAs are money PoAs, and this is the type we will focus on today.
Why would I need one?

You might need one personally if you have a current mental or physical disability, or fear you might develop one in the future.

  • In practice, most people are concerned for their parents’ welfare
  • But it can be a part of prudent retirement planning to look into setting up a Power of Attorney for yourself.

If a person becomes incapable and no Attorney has been named, then an application needs to be made to the Court of Protection to become a deputy.

  • This is similar to the Probate system, where a person who dies intestate (without a will) will have an Administrator rather than an Executor appointed.
How do I get one?

Any donor over 18 can obtain a PoA by lodging the necessary form with the Office of the Public Guardian (PG), part of the Court of Protection system.

  • You don’t need to live in the UK, or to be a British citizen (and nor do your attorneys).

The form requires the donor to name one or more attorneys, who also need to be over 18.

  • There can be up to six attorneys, including a “trust corporation”.
  • If there is more than one attorney it must be clear whether they will make decisions jointly or independently (“severally”), or a mixture of the two, depending on the decision.

The form will be certified (witnessed) by an independent person (often a solicitor or doctor, but it can be someone who has known the donor for at least two years) to confirm that the donor and attorney understand their new roles and responsibilities.

  • The certifier should not be a relative, business partner or employee, or anyone involved in a care home where the person lives.

The attorney then has to register the form at the OPG, and send another form to each extra attorney.

What can an attorney do?

An attorney can carry out most financial responsibilities that the donor might do for themselves.

  • This includes those that are related to property, investments and benefits.

So writing cheques and paying bills is covered, as is carrying out a trade and conducting legal proceedings.

  • Taking control of a bank account involves presenting the LPA agreement to the bank, as well as
    proving everyone’s identity and address.

The attorney needs to keep his / her finances separate from those of the donor, unless there were pre-existing joint arrangements.

  • The attorney also needs to keep records for big decisions (home sales etc, general records of assets, income and spending) but not for everyday ones.

There are restrictions on making gifts – they needs to apply to a “customary occasion” (a birthday or wedding) and be of a reasonable size.

  • Wills and settlements can only be arranged through the Court of Protection.

Many PoA documents will add their own specific restrictions (for example, multiple attorneys to jointly make decisions about the family home).

  • You can also specify that the PoA should not be used until the donor has lost capacity.
Expenses

Attorneys can claim modest expenses (professional services, travel costs, stationery, postage and phone calls etc).

  • Legally, receipts should be kept and invoices issued.

It may be simpler to have the donor pay directly for whatever is possible.

Abuse

The OPG can arrange visits to check an attorney’s decisions.

  • But in practice, there is little monitoring of attorneys once they have been appointed.
  • And therefore abuse is possible.

This often only comes to light later, when the PG investigates after concerns are raised by a relative, professional advisor (eg. solicitor) or other whistleblower.

  • Additional protections include measures like the production of annual accounts to be presented to an independent person, though these can be time-consuming and expensive.
How do I revoke a PoA?

To revoke a PoA, the donor needs to be of sound mind.

  • The PoA is revoked using a deed of revocation, which is served on the attorney and sent to the PG.

If the donor has lost capacity, then the Court of Protection would need to revoke the PoA, which would normally only happen where there is evidence of fraud or undue pressure to take out the PoA.

An attorney can also revoke a PoA.

  • A replacement attorney may or may not be appointed at the same time.

The PoA is automatically revoked if the donor (or attorney) dies or becomes bankrupt.

  • If the donor or attorney were married and get divorced, this also cancels the PoA.

The PoA will also lapse if the attorneys lose mental capacity.

How much does this all cost?

Which sell an LPA pack of forms for £139, which includes a legal review that you have filled in the forms correctly.

Registering an LPA with the PG costs another £82.

If you want to go down a more expensive route, you could use a lawyer.

  • Legal fees could easily be £1,000 or more.

Legal aid is not available for money LPAs, but may be available (after a means test) for welfare LPAs.

  • The Law Society can point you at solicitors offering legal aid.

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Becoming a deputy after the donor has lost capacity is more expensive.

  • Registration costs £400.
  • There is an initial charge of £100.
  • And an annual supervision fee of £320 pa.
Useful links
  1. Gov.uk
  2. Office of the Public Guardian
  3. NHS.uk
  4. Law society
  5. Age UK
  6. Money Advice Service
  7. Citizens Advice
  8. Which?
  9. MoneySavingsExpert

Until next time.

Mike Rawson

Mike is the owner of 7 Circles, and a private investor living in London. He has been managing his own money for 35 years, with some success.

2 Responses

  1. Avatar Erith says:

    Mike – Thank you. This is an excellent article. I can only stress how valuable such the Power of Attorney is.

    To give a specific example, – We live in Scotland. In February 2014 my mother did her PoA through a lawyer. It cost her £250 + VAT, and a further £70 for registration. Total £370. Money well spent. It meant that just a few months later, my mother could easily hand over her banking affairs to my husband as her sight had failed. (Her brain hadn’t) . Later when she ended up in hospital, the PoA took away any issues about my husband and I being involved in decisions about her care.

    We both re-did our wills and PoA’s at the same time. Our total was £1,100 inc vat.

    We also have several people named on the PoA, so we do not fall into the same position as a friend whose brother was the sole person named on the mother’s PoA and he died before her, which left a total mess, when she was already grieving for a brother and trying to look after her mother who was in a nursing home with dementia.

    A PoA also ensures that your wishes will be carried out, if you are not able to do it yourself. e.g. I am very clear – I do not want resuscitation. My family are all well aware of this.

    While costs will have gone up in the last 3 years, a solicitor will provide a quote for a PoA, so it is worth asking for one. It will cost a bit more than the Which document, but they will deal with the registration on your behalf.

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Lasting Power of Attorney – Coping with Dementia

by Mike Rawson time to read: 5 min