How to set up a power of attorney

What you need to know

There are so many things to enjoy about getting older – not least retirement and the time it brings to enjoy the fruits of a successful life. But few of us want to think about the less enjoyable side of ageing.

No matter how capable you are of managing your affairs today, it’s important to prepare for the possibility that your mental capacity could decrease, perhaps because of illness or simply old age.

If you were unable to make decisions about things like your health and finances, then a nominated individual can make those decisions for you by using a lasting power of attorney (LPA).

It can also be a helpful tool if you simply don’t want the hassle of dealing with your finances and want to hand over the responsibility to someone you trust. Further, LPAs are suitable for younger people, who may want protection in case something unexpected happens.

This article will explain what power of attorney is and how it can be used to protect your interests.

What is lasting power of attorney?

There are three different types of power of attorney, the most commonly used is an LPA.

The other types are the enduring power of attorney (EPA) and an ordinary power of attorney (OPA). EPA covered financial affairs but stopped being provided in 2007, although EPA’s created before that date remain effective. From 1 October 2007, EPAs were replaced by LPAs.

An OPA, sometimes known as a general power of attorney (GPA), either gives the attorney power to do anything the donor can lawfully do, or the power can be restricted to a specific purpose. Unlike an LPA and EPA, an OPA is automatically revoked if the donor loses mental capacity.

LPA will be the focus of this article. Put simply, it’s a legal document which allows someone you trust to make decisions on your behalf if you were to lose the capacity to make decisions – either about your health and welfare and/or property and financial affairs. While you can make an LPA for both health and financial decisions, they are different and must be created separately (although you can set up both simultaneously if you wish).

Both types of LPAs must be established while you still have mental capacity to make decisions. Your attorney can only use an LPA for health and welfare if you were to lose the capacity to make decisions. For financial matters, however, you can choose to pass over responsibility to your attorney at any point, as long as you selected that option when creating the LPA.

The sort of decisions an attorney might be expected to make in relation to finances could relate to buying or selling your home or paying bills. In relation to health and welfare, an attorney may be involved in giving or refusing health care (noting that provision for life-sustaining treatment needs to be expressly made by the donor).

Why might you need an LPA?

Without an LPA in place, you and your family could find it much more challenging to handle your finances or health decisions if you were to lose your mental capacity.

They could find that some institutions simply won’t or can’t deal with family members of an account holder, meaning if you were unable to act yourself then your family could be left unable to access important funds. Your family may even need to go to the Court of Protection to be given the right to make decisions for you.

Having an LPA in place also gives you control over who will be making financial decisions for you, meaning you can be safe in the knowledge that they will act in line with your wishes or with your best interests at heart.

As set out above, a financial LPA can also be used if you still have mental capacity and simply do not wish to manage your finances any longer, allowing you to nominate someone else to act on your behalf. This is not the case for the health-based LPA.

How do you set it up?

You can apply for an LPA yourself, or use a solicitor to help you. While it is straightforward enough to make the LPA yourself, if there were any mistakes, you may find you have to reapply, incurring further fees.

The required forms can be downloaded from the website of the Office of the Public Guardian (OPG).

You will need your forms to be signed by a ‘certificate provider' who can confirm that you understand what you are doing and have the mental capacity to make the decision at the time you applied. This can be a professional – such as a doctor or solicitor – or someone you have known for at least two years, but it cannot be a partner, family member or your attorneys’ families.

The attorneys themselves will also need to sign, and you will need witnesses.

The fee for setting up an LPA is £82 and you will then need to register it with the OPG which can take up to 20 weeks. The attorney cannot start acting until the registration is complete.

Be aware that if you already have investments managed on your behalf (i.e. discretionary wealth management) or would like to allow your attorneys to use a scheme involving discretionary investment management it would be prudent to explicitly state this when you are creating the LPA and to also seek independent legal advice.

This should allow your wealth manager to continue handling your investments on a discretionary basis once the LPA is invoked or give your attorney the flexibility to consider using a discretionary investment manager.

Who can you choose to be your LPA?

As long as they are over 18 and able to make decisions, you can choose anyone to be your attorney.

Often people will choose a, family member or solicitor but in the case of a property and financial affairs LPA you can also choose a trust corporation. Don’t be confused by the term ‘attorney’, you do not need to be a legal professional to act in this way.

Be aware that professional attorneys can charge for their time and claim fees and/or reasonable expenses, so be sure to take these potential expenses into account when making your decision. Family members can also claim reasonable expenses incurred as a result of the responsibility.

You can nominate multiple people to share the responsibility should you wish. In this case you will have to decide whether they will need to make all decisions jointly, or whether they will also have the power to make decisions individually.

When making the application you can also nominate someone to take over should your attorney be unable to act for you.

Anything else to consider?

If the idea of handing over control of your finances to someone else feels daunting right now, then remember that it isn’t necessarily permanent.

You can cancel an LPA at any time while you still have the mental capacity. All you need to do is write to your attorney and the OPG to inform them of the change.

You will also need to tell the OPG if any of your attorneys dies, changes their name or address.

For more information please visit the Gov.uk website.

This article has been written for information purposes only. Rothschild & Co does not provide legal, tax, accounting and/or other specialist advice. You should always seek independent legal advice if you have questions about the content of this article or specific advice relating to your particular circumstances.

^{Past performance is not a guide to future performance and nothing in this article constitutes advice. Although the information and data herein are obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, no responsibility or liability is or will be accepted by Rothschild & Co Wealth Management UK Limited as to or in relation to the fairness, accuracy or completeness of this document or the information forming the basis of this document or for any reliance placed on this document by any person whatsoever. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, targets, estimates or forecasts contained in this document. Furthermore, all opinions and data used in this document are subject to change without prior notice.}