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Inherited Wealth

Powers of Attorney: Is mine fit for purpose?

Ann Stanyer of law firm Wedlake Bell explains the growing importance of Powers of Attorney as an essential part of retirement planning

power of attorney

by
Ann Stanyer

in Inherited Wealth

14.11.2019

We are now all used to hearing reports about increasing life expectancy and it is helpful to see how the statistics show the effect this is having on us all. In 2000 life expectancy was 75.61 years for men and 80.36 years for women. However, by 2016 life expectancy had increased to 79.5 years and 83.1 respectively. One aspect of this that is not often reported are the rates of ‘healthy’ life expectancy.  Although a man could expect to live 79.5 years in 2016, his average healthy life expectancy was only 63.3 years. This means that he would have spent 20% of those years not in good health.  A woman would see some 23 per cent of their 83.1 years not in good health. These stark figures show why each of us should plan ahead for both health and financial decision making.

All are well-advised to consider putting in place a power of attorney as part of their retirement planning along with reviewing their wills and pension provisions. Similarly, younger people should consider how their elderly parents have provided for decision making once they are no longer able to make decisions themselves. It is an important conversation to have with them and to ensure that they obtain good legal advice.

As we age, we need help to manage our finances and to take health and welfare decisions. The advent of Lasting Powers of Attorney (LPAs) in 2007 has led to a rapid take up by the public.  In the last year alone some 835,950 powers of attorney were registered and a total of 3.8 million powers are now on the public register.

Types of Power of Attorney

What types of power of attorney are there now? Many clients will have completed the old form of Enduring Powers of Attorney (EPAs) which could be signed up until 1st October 2007. These are still valid but only for property and financial affairs decisions. They also work in a slightly different way from LPAs. They can be used without registration and before loss of mental capacity provided the donor consents to the attorney acting for them. Both LPAs and EPAs must be registered at the Office of the Public Guardian (OPG) once the donor of the power is becoming or has become mentally incapable.

The other big difference between LPAs and EPAs is that since the Mental Capacity Act 2005 donors have been able to appoint attorneys to act for them in respect of health and welfare decisions. Such decisions include decisions about life sustaining treatment, and also cover more everyday issues such as consulting medical professionals, access to medical records and decisions about care home options.

Choices

When LPAs are being discussed with clients it is very important to explain the choices of attorneys available to donors. The most frequent suggestion from clients will be for each spouse to appoint the other as an attorney and appoint two of their children as the replacement attorneys. We always ask the clients whether their chosen attorneys get on with each other, what their financial management skills are and whether the attorneys would carry out their donor’s wishes. Also, do they have time to manage someone else’s affairs as well as their own ?.

Restrictions or guidance

Whilst detailed instructions can be contained in the document advice is required on what is permissible and legally binding. Guidance may be included, which may or may not be complied with by the attorneys.

Since September 2015, any donor with an investment portfolio must have an investment clause included in their power of attorney in order for the investment manager to continue to manage investments on a discretionary basis (once capacity has been lost). For LPAs signed before that date and for all EPAs, such a clause is not required.  If the clause has not been included and the donor has lost their capacity then some investment managers can require an application to the Court of Protection for a specific order allowing discretionary investment management to take place or to be continued.

Many attorneys assume that they can make unlimited gifts of the donor’s property and money but this is not the case.  Anything beyond merely customary or seasonal gifts must be authorised by the Court of Protection once a donor has lost their capacity. Such Court applications are now commonplace and provide a useful means to carry out significant tax planning for the donor at the end of their life.

Keep under review  

We recommend clients regularly review both their Will and Power of Attorney.  Even if a donor's circumstances have not changed, those of an attorney may well have done. Some situations require an attorney to step down. For example, if an attorney under an LPA for property and financial affairs becomes bankrupt or subject to a debt relief order then they can no longer act as attorney. In addition, if an attorney is married or in a civil partnership with the donor and they divorce, unless the donor has provided otherwise in the LPA, they must stop acting for the donor. If you need to change the power of attorney, it is a simple matter of revoking the earlier one and completing a new LPA. For many clients who only have an EPA, they may well want to consider a health and welfare LPA now as this would give their attorneys access to medical records and enable them to speak to their doctor on their behalf.

Powers of Attorney require care in drafting and the considered appointment of attorneys. Legal advice on the choices available and subsequent reviews will help protect you when you are unable to protect yourself. Banks and Investment houses will no longer accept the requests of well-meaning family members seeking to help unless they are formally empowered by a registered Power of Attorney.

Ann Stanyer is a Private Client Partner at Wedlake Bell and advises on Wills and Power of Attorney. She is the author of Financial Abuse of Older Clients: Law, Practice and Prevention (Bloomsbury Professional).
Contact information: Wedlake Bell LLP 71 Queen Victoria Street London EC4V 4AY
Email: [email protected]    Direct line: 020 77674 0577     Website: www.wedlakebell.com

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