A Lasting Power of Attorney (LPA) is a legal document enabling an individual (the donor) to appoint a trusted person to make decisions on their behalf – typically in case they become incapacitated. This can be crucial for clients, offering reassurance that their finances will be managed according to their wishes if they can no longer make decisions independently.
Lasting Powers of Attorney were introduced in 2007 under the Mental Capacity Act, replacing the previous system of Enduring Powers of Attorney (EPAs). There are two types of LPAs: one for property and financial affairs, and another for health and welfare. The property and financial affairs LPA allows the attorney to make decisions about an individual’s property, finances and other assets. The health and welfare LPA allows the attorney to make decisions about an individual’s personal care and medical treatment.
EPAs provided similar rights to a property and finance LPA but did not cover health and welfare decisions. Although it has not been possible to create a new EPA since the Mental Capacity Act took effect, those signed and dated before 2007 can still be registered. Registered EPAs continue to be applicable and valid.
For an LPA to be legally valid, it must be registered with the Office of the Public Guardian (OPG) before it can be used. The individual must be aged 18 or older and have mental capacity to make an LPA. This broadly means that they understand the nature and effect of the document and are able to make decisions about their own affairs.
The donor has the option to appoint one or more people to serve as their attorney. These appointed attorneys can be given the authority to act in two possible ways: jointly, where they must make decisions together, or jointly and severally, where they can make decisions independently or together. Additionally, the donor can designate replacement attorneys who will step in if the original attorneys are unable to fulfil their duties, ensuring continuity in decision-making. To qualify as an attorney, a person must be over the age of 18 and possess the mental capacity to make informed decisions.
The first step is to obtain the LPA information pack and forms from the OPG. These can be completed by hand or pre-populated then printed using the online service on the gov.uk website.
Once completed with the details of the donor and attorney(s), the forms also need to be signed by a 'certificate provider'. This individual ensures that the client understands the LPA and has not been coerced into signing. The certificate provider must be either someone who has known the client well for at least two years or a professional such as a doctor, social worker, or solicitor. It is important to note that partners or family members are not eligible to act as certificate providers.
The final step is to register the LPA with the OPG. The LPA cannot be used until registration is complete, which can take several weeks. If the donor remains capable, they can continue making decisions after the LPA is registered, either alongside the attorney or independently.
Donors can impose specific restrictions and conditions for their attorneys in two situations: when assisting the donor in making decisions, and when making decisions on the donor's behalf if the donor is unable to do so, even with support. Conditions convey general wishes that the donor would like the attorneys to honour if possible. Restrictions explicitly outline what attorneys must do when making or supporting decisions for the donor.
Responsibilities of an attorney
An attorney has a legal duty to act in the best interests of the donor and must adhere to the Mental Capacity Act Code of Practice and its five guiding principles.
An attorney must only make decisions that they have been given the authority to make. If the LPA requires decisions to be made jointly, the attorney cannot make decisions independently. Similarly, the attorney cannot make health and welfare decisions if the donor has the mental capacity to make those decisions themselves. Attorneys must respect the type of LPA in place: a property and financial affairs attorney can only make financial decisions, while a health and welfare attorney can only make decisions related to health and welfare. Many attorneys may hold both roles.
When it comes to decisions about life-sustaining treatment, it is crucial to ensure that a health and welfare attorney is acting within their authorised powers. Attorneys should consider the donor’s past and present wishes and feelings, participating in broader best interests’ discussions even if they do not have direct authority over a particular decision.
An attorney is required to keep the donor's funds separate from their own to prevent any commingling of assets. This ensures clear financial boundaries and accountability, protecting the donor's assets from potential misuse or confusion with the attorney's personal finances. This separation is crucial for maintaining transparency, facilitating accurate record-keeping, and upholding the fiduciary duty that the attorney owes to the donor.
If an attorney exceeds their authority or neglects the donor's best interests, they must be reported to the OPG. The OPG will investigate and, if needed, can petition the Court of Protection to remove the attorney.
Using the LPA
Once the LPA has been registered with the OPG it can then be sent to third parties to be used. When sending a paper version of the LPA, providers typically prefer to receive the original document to ensure authenticity. However, considering the significant importance of the document, many clients may understandably hesitate to send it via postal mail.
If a photocopy of the original is sent there are stringent regulations governing the certification of copies of LPAs, outlined in Section 3 of the Powers of Attorney Act 1971. According to these rules, only certain individuals are authorised to certify copies as originals. This group includes the donor themselves, solicitors, notaries public, and stockbrokers. It's important to highlight that regulated financial advisers are absent from this list of authorised certifiers.
In July 2020, the OPG introduced the ‘use an LPA’ service that allows individuals to confirm the validity of an LPA online. This service enables authorised organisations, such as banks, investment providers or healthcare providers, to verify whether an LPA is registered with the OPG and therefore legally valid. It provides a method for institutions to ensure that they are dealing with appointed attorneys who have the legal authority to act on behalf of the donor.
The service was initially introduced for LPAs registered starting from July 2020. However, as of 4th March 2021, its coverage was expanded to include LPAs registered on or after 1st September 2019.
Upon registration of a new LPA, both the attorneys and the donor will receive an activation key. This key enables them to establish an online account and link the LPA to it. Subsequently, they can generate an access code to share with relevant organisations. This code allows these entities to access an online summary of the LPA and verify its authenticity. While usage of the service is increasing, not all organisations accept it as an alternative to a certified copy of an LPA.
The OPG has expressed interest in extending the availability of the service to cover LPAs registered before September 2019. However, they have highlighted the need for additional analysis and assessment before reaching a final decision on this matter.
LPAs and discretionary fund managers (DFMs)
Attorneys can seek professional advice when carrying out their duties, such as consulting with lawyers, financial advisors, or other experts to make well-informed decisions. However, as a general rule, attorneys cannot delegate the decision-making authority that has been entrusted to them to another person. This means they must personally make the decisions they were appointed to handle. The only exception to this rule is if the donor has explicitly authorised such delegation in the LPA document. Without this specific authorisation, the responsibility to make decisions remains solely with the appointed attorneys.
This can create complications when it comes to appointing the services of a DFM. Engaging a DFM involves allowing them to make investment decisions on behalf of the donor, which could be seen as delegating decision-making authority.
While the donor retains mental capacity, they can appoint a DFM without any issues, allowing the DFM to manage investments and make decisions on their behalf. Problems can arise if the donor subsequently loses capacity. If the LPA does not contain an explicit provision authorising the attorney to delegate investment decisions to a DFM, the appointed DFM might be unable to continue making discretionary investment decisions.
The original guidance from the OPG was that attorneys could not delegate decisions to an investment fund manager unless they had specific permission within the LPA. In March 2022, the OPG updated its guidance, removing the requirement for individuals to include that specific wording but the guidance still suggests that legal advice may be necessary and notes that some financial institutions may continue to require it.
This implies that clients who wish for DFMs to manage their investments after they lose capacity may still need to include specific language in their LPA. It is essential for clients to consult with their DFM to understand the protocol for loss of capacity and determine if any additional wording should be included in the LPA to ensure continuity.
