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Planning for the future can involve confronting some uncomfortable issues but may give you some peace of mind. Wouldn’t it be nice to know that there is someone there to look after everything for you should you become incapable of managing your financial affairs?
The law on powers of attorney has recently changed and this article will explain how the changes will affect those who have existing powers of attorney and those wishing to create a power of attorney in the future.
General powers of attorney
A general power of attorney is wide ranging and gives the person making the power of attorney (called the donor) the ability to confer considerable power on another person (called the attorney) to deal with the donor’s financial affairs. It is commonly used when a donor is moving away for a long period of time or is going on holiday and therefore it would be difficult for him to deal with his financial affairs. A general power of attorney is automatically annulled when the donor becomes incapable of making decisions conferred by the power. General powers of attorney are widely used and have not been affected by recent changes in the law.
Enduring powers of attorney (EPAs)
Unlike a general power of attorney, an EPA will cover the situation where the donor suffers subsequent mental incapacity to make decisions conferred by the power. If the donor loses his mental capacity the EPA can then be registered and an attorney can continue to act. The law however changed on the 1st of October 2007 replacing the EPA with the lasting power of attorney (see below). Existing EPAs are still valid and can still be registered if the donor loses capacity to make decisions. They will still remain effective but new EPAs can no longer be created.
Lasting powers of attorney (LPAs)
There are two types of LPA - The property and affairs LPA and The health and welfare LPA. The former deals with financial affairs and property only. The latter enables attorneys to make decisions about the donor’s wellbeing. These decisions would include deciding where and with whom they should live, making decisions relating to their day to day care and giving consent to medical examinations and treatment. The property and affairs LPA has taken over the main functions of the old EPA. If you already have an EPA it should be possible to create a health and welfare LPA to run alongside it.
The LPA differs from the EPA in many ways. The LPA is a much longer document consisting of twenty six pages rather than four. In addition there are comprehensive explanatory notes for donors to read before completing the LPA. As the form is twenty two pages longer than the EPA the information required by the form is far more detailed. The additional information required by the LPA includes providing names for replacement attorneys and providing guidance for the attorneys to respect following the donor’s incapacity. Promises can be made for the attorneys to be paid for fulfilling their role and also the donor can specify who should be notified when the power is registered. In addition the LPA is not effective until it has been registered with the Office of the Public Guardian whereas the EPA became effective when created and continued to be effective when it was registered at The Court of Protection when the donor had lost mental capacity.
The Certificate Provider
Another big change is that the donor must obtain a certificate provider. The certificate provider is a person whom the donor has chosen to certify that he is capable of creating an LPA. The certificate provider confirms that the donor understands the document’s contents, understands the powers the attorneys will receive and also confirms that the donor is not under any duress or pressure. Without a certificate provider the LPA cannot be validated and registered. There are two types of certificate provider. Type A is knowledge certification. This is where the donor has known the individual for more than two years. Type B is the skills based certification where a GP, solicitor, social worker or an independent mental capacity advocate will provide the certificate. Undoubtedly the new LPA regime has imposed a considerable amount of extra work and bureaucracy. However it is important to remember that a power of attorney is an extremely powerful document and that in the wrong hands, it could cause great damage and be subject to abuse. Once people have become accustomed to the more stringent regime of LPAs, it is expected that they will be perceived as a very useful device for making provision for the future.