Written in conjunction with Catherine Thomas-Humphreys, aka The Finfluencer.
A power of attorney is a legal document that allows you (the donor) to give another person (the attorney) the right to make decisions on your behalf.
- You choose the person or people in charge of making decisions which affect you
- You make things easier, quicker and less costly for your relatives should anything happen to you
- You can guide your decision makers with your preferences and instructions
Without a power of attorney in place your nearest and dearest would have no rights to make decisions about what happens to you or your money if something serious befalls you. Instead, your loved ones would have to go to court to be granted the right to make these decisions on your behalf.
In this article, we explain three key points you should know about power of attorney.
Different Types of Power of Attorney
Generally, there are two types of Power of Attorney that can be created today.
- Ordinary power of attorney
- Lasting power of attorney
An Ordinary Power of Attorney is a temporary, short-term general attorney that only looks after financial affairs, not health and welfare. Once you lose capacity to make your own decisions, the person you nominated can no longer act for you. It may be useful if you need short term support e.g. going traveling or recovering from an illness.
A Lasting Power of Attorney is much more flexible and can be used for financial and/or health affairs when the donor (you) either still has capacity or after you’ve lost capacity (e.g. a serious brain injury). You can register it ahead of something happening, so it is available if and when required.
Two Types of Lasting Power of Attorney (LPAs)
In England and Wales, there are two types of Lasting Power of Attorney that can be set up. You will need to submit a separate application for each.
A Health and Welfare LPA gives the attorney power over decisions such as:
- Your daily routine – washing, dressing, eating etc.
- Your medical care
- When to move into a care home
- Life-sustaining treatment
A Property and Financial Affairs LPA gives the attorney power over decisions such as:
- Managing your bank or building society account(s)
- Collecting your benefits or pension
- Paying your bills
- Selling your home
Once registered with the Office of the Public Guardian, the property and financial affairs power can be used immediately or held in readiness until required. You can restrict the types of financial decisions your attorney can make, or let them make all decisions on your behalf.
What happens if you don’t have a Lasting Power of Attorney (LPA)
It is imperative for everyone to set one up, even if young and healthy, because you never know what is going to happen. Without one, an accident or illness can cause undue stress and financial difficulty for your family.
If you no longer have capacity to make decisions and don’t have an LPA, your loved ones would have to apply to the Court of Protection to become a ‘Deputy’. This process can take more than a year and is complex and costly. It often involves paying additional legal fees that can run into thousands of pounds. In the meantime, there might be considerable difficulties for loved ones in making decisions on your behalf and accessing your finances for you.
Take for example, a couple with a joint bank account. In theory, if one joint account holder loses mental capacity, then that person can no longer consent to the continued use of the bank account by the other joint holder. As a result, the bank or building society with which the account is held should, as soon as it becomes aware of that fact, freeze the account and limit access to the funds to:
- an Attorney acting under a registered LPA for property and financial affairs (or an Enduring Power of Attorney, which were replaced by LPAs in 2007) or failing that;
- a Deputy acting under a Deputyship Order (appointed by the Court of Protection).
If there is no Attorney appointed, the bank or building society will use their discretion to determine whether or not to temporarily restrict the access of the joint account to ‘essential transactions’ only (for example; living expenses, medical bills and care fees).
How much does it cost?
The fee to register a Lasting Power of Attorney is £82 in England and Wales. If you want to register both a Property and Financial Affairs LPA and a Health and Welfare LPA, it’ll cost you £164. In Scotland the fee is £81, and in Northern Ireland it’s £151.
If you earn less than £12,000, you can apply for a 50% reduction. You may also qualify for an exemption if you’re on certain benefits, such as Universal Credit.
Some people prefer to get their Power of Attorney prepared by a solicitor. This can prevent mistakes which sometimes cause an application to be rejected. You’d need to pay this professional for their time and expertise to prepare the documents and manage the process so the cost will be higher ranging from £200-£500 plus the registration fee.
The LPA Process
To give someone the authority to act on your behalf, you’ll need to set up a Lasting Power of Attorney (LPA) and then register this agreement with the Office of the Public Guardian (OPG). An LPA can only be set up whilst you have mental capacity i.e. when you understand the decision you are making.
- Complete the LPA Documents
- Have them signed and witnessed correctly
- Submit for registration with the OPG
The first stage is to complete the LPA Documents. You can do this yourself via the forms on the Office of Public Guardian website, or find a professional to help you with this. A professional may be sensible if you want any of the terminology explained or need help deciding how attorneys should act. You may also want to know that the forms have been checked for mistakes and reflect your wishes accurately. During this stage:
- You’ll nominate your attorneys
- State how you want them to act
- Include and Preferences and Instructions
- Print for Signing
Sign and Witness
This stage is where many mistakes happen. Sign each page where indicated, clearly and without correcting mistakes and in the correct date order. Each signature must be witnessed. If you are doing this yourself, make sure you refer to the guidance section on the OPG website, or, if working with a professional, they will check these thoroughly before submitting to the OPG.
Register
Send to the OPG with Registration Fee and supporting evidence if applying for a reduced fee.
The registration process with the Office of Public Guardian usually takes 8-10 weeks, as long as there are no mistakes on the form. Currently this process is taking considerably longer and could be up to 20 weeks. Once registered, the completed LPA will be returned to you for safe keeping.
Need more help and support with organising your financial life? Maji’s tools and resources can help you keep track of your money, plus you can connect with helpful experts on our platform. Find out more here.
Image by Adeolu @ Unsplash
