Most people assume their spouse or partner would automatically gain control of their bank account and other assets. But it’s not always true – and that’s why it’s worth thinking about power of attorney.
Lasting power of attorney is a legal arrangement that allows you - the donor - to appoint one or more people - the attorneys - to help you make decisions, or to make decisions on your behalf.
There are two types: health and welfare and property and financial affairs and this guide covers property and financial affairs.
For example, you might suffer from dementia and lack the mental capacity to pay your mortgage or decide where to deposit your savings. Or perhaps you are involved in an accident that leads to a long stay in hospital and makes it difficult for you to manage your financial affairs.
You must be 18 or over when you set up a lasting power of attorney. You must also be mentally capable. A so-called certificate provider must therefore sign the document to confirm that you understand the process and have not been put under any pressure.
To minimise the risk of exploitation, the certificate provider cannot be your spouse or another family member, but must be someone you have known personally for at least two years.
Alternatively, you can ask a professional with the relevant skills, such as a doctor or solicitor.
The Mental Capacity Act 2005 sets out the legal test for mental capacity.
For example, someone who is mentally capable should be able to understand and remember information and communicate a decision, even if the communication is through signs or pictures.
Power and responsibility
The role of attorney carries a great deal of power and responsibility. It is therefore essential that you pick your attorneys with care.
Like the donor, the attorney must be over 18 and have the mental capacity to make their own decisions. Plus, an attorney cannot be bankrupt or subject to a debt relief order.
Someone you trust
You can choose a relative, friend, spouse, partner or even a professional person such as a solicitor. An attorney should not, however, be a paid care worker except in exceptional circumstances.
It’s a good idea to select someone you know well and whose financial judgement you trust. How do they manage their own finances? If they are constantly in debt and struggling to make ends meet, they might not be an ideal choice.
You should also be confident that the person will always act in your best interests.
You can choose more than one attorney, but you should set out clearly how the attorneys should operate. You can, for example, insist that they make any decisions jointly, so they would all have to agree. Or you could be happy for them to act separately.
Alternatively, you might want them to make some types of decision jointly and others separately.
You can also limit the types of decision they can make. For example, you might not want your attorneys to have any control over the sale of your home.
A solicitor can help you set up a lasting power of attorney, though they will charge a fee. You can also do it yourself by downloading the forms and the information pack from the website of the Office of the Public Guardian.
On the register
Don’t forget to register your lasting power of attorney with the Office of the Public Guardian (OPG) or it will not be valid – and bear in mind that registration can take up to 10 weeks.
It costs £82, unless you are on a low income or receive means-tested benefits, in which case you could qualify for a reduction or exemption.
Take care to fill in the forms correctly as you could incur a second registration fee if you make a mistake and the paperwork is returned.
If you are unable to register the documents yourself, an attorney can register on your behalf, though you will be notified and can object.
People to be notified
Donors are asked to name up to five people to be notified when an application for registration has been made as a protection against fraud.
The people then have three weeks to raise any objections to the lasting power of attorney with the OPG. If you don’t name anyone on the form, you will need two certificate providers.
Cancelling the power of attorney
The lasting power of attorney can be used as soon as it is registered. If you want the attorneys to gain control only if you lose mental capacity, you should make sure your wishes are clear.
You can also cancel it at any time or set up a new one, as long as you are mentally capable.
The duties of an attorney are many and varied, but they must always follow the principles of the Mental Capacity Act.
For example, if a donor lacks capacity, any decision taken on their behalf must be in their best interests and the least restrictive of their rights and freedoms.
The attorney must keep their own money separate from the donor’s assets and must maintain full, accurate and up to date accounts.
Attorneys can claim expenses, such as travel and postage costs. But they are not normally paid for their time unless the donor has appointed a professional attorney, such as a solicitor.
Ordinary power of attorney
Lasting power of attorney is sometimes confused with ordinary power of attorney, but an ordinary power of attorney is only valid if the donor is mentally capable.
So, you might want to set up an ordinary power of attorney if you are in hospital for an extended period and need someone to manage your financial affairs during your stay.
It takes time and money to set up a lasting power of attorney. Some people are also nervous about handing over control of their finances to their attorneys.
But there are various safeguards to protect the donor from potential abuse. A lasting power of attorney can also allow you to make provision for your financial future.
It’s therefore worth considering a lasting power of attorney while you still can. In other words, while you are mentally capable.
Bear in mind, too, that if there is no lasting power of attorney in place and you lose your mental capacity, the Court of Protection would normally appoint a deputy to make decisions on your behalf. And the legal process can be lengthy and sometimes distressing for all involved.
This article covers lasting power of attorney in England and Wales. Different processes apply in Scotland and Northern Ireland. For more information, visit www.publicguardian-scotland.gov.uk or www.nidirect.gov.uk