A Lasting Power of Attorney (‘LPA’) is a legal document that enables the donor to choose someone (‘the Attorney’) to make decisions on their behalf about such things as their finances, property and their personal welfare at a time in the future should the donor become physically or mentally incapable to deal with those affairs.
There are two types of LPA’s, each one gives power over either health and welfare or property and financial affairs. A property and financial affairs LPA allows an Attorney to make decisions on the donor’s behalf about their property and affairs including paying their bills, collecting their income and benefits or selling their home subject to any restrictions or conditions.
A health and welfare LPA allows an Attorney to make decisions on the donor’s behalf about their personal welfare, including whether to give or refuse consent to medical treatment on their behalf and deciding where they live.
An LPA can be a blessing in cases in which people become incapacitated and unable to deal with their own affairs. Setting up an LPA is a sensible precaution for many people. Whilst there is a lot written about the benefits of an LPA little is available to those thinking of taking the role as an attorney. Serious consideration should be taken when considering this role and within this article we look several factors that should be taken into account when before taking on the role. The article may also be of use to those who are currently acting as attorney’s for a donor.
Time Spent and Reimbursement
When considering the role it is important to note that unless you are taking on the role as a paid professional you will not be able to charge for the time you spend in the role. However you can be reimbursed for any expenses you incur during the role provided that they were incurred whilst acting on behalf of the donor in tasks that were in the donors best interest such as:
• hiring a professional to do things like fill in the donor’s tax return • travel costs • stationery • postage • phone calls
Keep records
Whilst acting as an attorney it is imperative that you keep records of any significant decisions you make and to be able to account for any of the donor’s money that has been spent. Should a dispute arise it is again important that a record is kept and advice is sought as to how to deal with the dispute.
Making Gifts
The definition of a gift for the purpose of an LPA is quite broad and can include money, property, possessions belonging to the donor, creating a trust for someone over the donor's property and even interest free loans.
When making a gift you must first ensure that there is nothing in the property and financial affairs LPA that restricts you from making a gift. In addition you must ensure that any gift made is in the best interest of the donor.
The Mental Capacity Act 2005 sets out an attorney powers to make gifts. Unless the LPA states otherwise Under section 12(2) of the Act you can only make gifts if they are either:
- to a family member, friend or acquaintance of the person on a ‘customary occasion’
- to a charity
In both cases, it’s essential the gift is of reasonable value given the size of the person’s estate (all the money and property they own). If you are looking to make a gift that does not meet the above requirements then you would have to seek the approval of the court of protection first. As mentioned it is important to keep records of any gifts made as the Office of Public Guardian (OPG) can investigate any gifts made and may ask to see evidence of the gifts made. When making a record it is important to ensure that the reasoning for the gift and it’s value have been noted.
Finally given that you are not obliged to make gifts on a donor’s behalf careful consideration should be given when exercising the discretion to do so.
Loans
Unless the power of attorney states otherwise you will not be able to make loans to yourself or interest free loans to others without an order from the Court of Protection. This is due to the fact that loans of this nature would be considered gifts.
Keep your finances separate
When acting as an attorney it is vital that you keep your finances separate from the donors. This is to avoid misappropriating the donor’s money by mistake for your own. This is due to the fact that by accepting the role of an attorney you will be accountable to the OPG for any action you take.
Online Banking
Before using donors online banking an attorney must provide the bank with a copy of the property and financial affairs LPA and obtain the banks consent to do so. Should you fail to do so you could be committing a crime under the Computer Misuse Act 1990.
For further information please contact Posada & Co.