What is a Lasting Power of Attorney (LPA), and why might I want one? 

A Lasting Power of Attorney is a legal document in which you (the ‘donor’) appoint people of your choice to act on your behalf. In the absence of an LPA, if you lose mental capacity, your loved ones are not given the automatic right to take control of your affairs. Being married, or even owning assets in joint names makes no difference.

The Court of Protection looks after vulnerable adults. In the absence of an LPA, your loved ones would have to apply to become your legal representative, called an attorney. Where this isn’t possible, the courts would appoint a deputy. This would typically be a civil servant or solicitor. The process of applying through the courts can be expensive and time consuming.

How many types of LPA are there?

The Property and Financial Affairs LPA can be drafted to be used should you become unable to manage your financial affairs, lose mental capacity, or both. Essentially, your attorney could have access to your savings, have the power to sell your house, or manage your day to day income and expenditure.

The Business LPA, however, is specifically designed to protect your business interests and is a separate document. After all, your business partner probably wouldn’t want your spouse or partner to have the authority to make decisions on the business, and vice versa! These are vital, so that your loved ones aren’t left with the burden of responsibility for your business affairs as well.

With a Health & Welfare LPA you also have the option to give your attorneys the power to refuse life sustaining treatment, make decisions about day to day care issues, and arrange care at home or in a care home environment. You may also give them the right to access to your medical records.

What should I be thinking about?

LPAs are governed by the Mental Capacity Act (2005). Broadly speaking, the people that you appoint as your attorneys must follow the principles of the Mental Capacity Act and act in your best interests.

Your choice of attorney(s) is critical, and you must be confident that they are capable and would take their responsibilities seriously.

Case Study

Naturally, LPAs are particularly important for an elderly or vulnerable person although in reality we should all consider one especially if you’re in business. The role of an LPA is best illustrated by the following case study for a married couple we helped last year. 

They have two children, one at university, the other in an apprenticeship in a local engineering firm. To protect the clients’ identity, I’ll refer to them as Jack and Jill. 

Jill worked part-time for a high street bank and Jack ran a successful small business employing 11 people. Jack had been working with his business partner for nearly 20 years. 

To be fair, their agreement to meet us was to discuss putting wills in place as they’d been nagged for years by their accountant to review their Inheritance Tax (IHT) position and get their wills sorted out!

After we’d been talking for about 20 minutes, I quickly realised that these were “text-book clients”. No Wills. No LPAs. Jack had no shareholder agreement, no means of buying out his co-director’s shares if he died prematurely and no LPA for the business either.

Whilst both types of LPA are vital, let’s look more closely at the financial LPA in this example. Jack and Jill soon recognised the benefits of having an LPA and proposed appointing each other with a mutual best friend. But if Jack wanted to appoint Jill and the best friend to look after his personal financial affairs, would he also want the same people to look after his business interests too?

It became apparent that he didn’t. And Jack reckoned that his business partner wouldn’t want Jill to be involved either. So other than having a personal LPA for his financial affairs, he also wanted to protect his business interests too. Jack was the key person who ran around the county drumming up business whilst his co-director was typically office based. What would happen if Jack were involved in an accident or became seriously ill?

So why do so many people not have an LPA? 

They’re probably making an assumption that if they lose capacity their spouse can automatically take control of their affair. After all, they are married. This is not true! Jointly owned assets do not remove the need either.

The same principles apply to owners of a business too. Remember, if Jack had been incapacitated, he would become a vulnerable person and the Court of Protection would look at all his affairs, including his business.

Often they are not getting the correct advice, or in some cases any advice at all. A business LPA is a great way of protecting your business interests and ultimately your family so should not be overlooked as part of planning for and protecting your future.

Procrastination is the enemy here. Take the necessary action to protect your family and your business giving you all valuable piece of mind.

How do I take the first step? 

The process of preparing an LPA takes place over two meetings:

First meeting

We talk you through your options: including who you may appoint, why and what they will be responsible for.

Second meeting

This is where we present the agreement to you (the donor) and your attorneys. This meeting also includes a simple test to demonstrate that the donor has a clear understanding of the LPA and the powers given to their attorney(s).

You can’t foresee an accident or the loss of mental capacity. But you can be prepared for all eventualities by protecting your business, assets and the people you love from having costly responsibilities.

Let us help to make a complicated process less of a burden for you.

Pop your details in the form below, and our A4G Legacy team will be in touch. Or give them a call directly on 01474 853856 or email mark@a4glegacy.co.uk.

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