Despite the challenges posed by the pandemic, permanent powers of attorney are useful tools for estate planning. The need to react quickly to sudden health changes has led many customers to get them done on time. The UK government is proposing to make LPAs more “digital”.
As reported a few weeks ago, the UK government is proposing to make the system of permanent powers more digital. The COVID-19 pandemic has made it harder for families to get LPAs signed and sealed – being able to do so online would be a huge benefit. But all technologies involve risks. Even if there has been criticism of how the LPA system works, it can be difficult to prevent abuse as it does not create new problems.
The aging of the Western population – an important trend that asset managers must follow – also provides a backdrop for this area. The consumer advisory community must take into account the needs of older customers and their families. These can be sensitive topics and pose a challenge, especially for younger investment advisors entering the profession.
To try to understand some of these ideas are lawyers from The Ince Group, a law and advisory firm in the UK. The authors are Peter Walker, Partner, Alen-Buckley, Solicitor, part of Ince Group, and Robert Payne, Managing Associate, Ince Private Wealth. To participate in the debate, email the editors of this news service at tom.burroughes@wealthbriefing and email@example.com. Please note that the usual editorial disclaimers of liability for views of external contributions apply.
Permanent powers of attorney enable donors to appoint a proxy who makes decisions for them in the event of the loss of legal capacity.
There are two types of LPA in mandatory form, covering (i) property and financial matters and (ii) health and welfare. The former can cover matters such as managing bank accounts, paying bills, buying and selling real estate, and managing tax matters, and can keep the lawyers in action while the donor is able and incapable. The latter addresses issues such as medical care, including end-of-life treatment, housing, and even permitted recreational activities or who the donor may have contact with. It will only take effect if at that point the donor is unable to make such a decision.
Both types of LPA allow considerable flexibility in the powers that are given to the attorney, subject to prescribed limits (e.g., an attorney may not consent to the donor’s marriage). Each type can be customized to suit the personal circumstances of the donor, such as having basic decisions made by a single lawyer or having all lawyers make certain key decisions together.
It is the powers that can be given to attorneys that make an LPA so important. An LPA avoids uncertainty about who should act, disputes over who should act, and someone the donor does not want to involve in decision-making. An LPA also avoids the costs and other problems of otherwise having to go to court to seek appointment.
Due to their importance and the problems with their predecessors, LPAs must be signed by the donor and lawyers in the prescribed manner. They must also be signed by a certificate provider who is an impartial person who certifies that the donor understands what they are doing and that the LPA is not being done under duress. The certifier must not be related to any party to the documents and must have known the donor well for at least two years or be a professional such as a doctor or lawyer.
The selection of lawyers is crucial. They should be people who can be trusted to do the right thing and who are capable of doing the tasks that they are supposed to do. They must act in good faith, avoid conflicting their interests with those of the donor, and not derive any personal benefit from their actions. If a donor is doing both types of LPA, the lawyers under each need not be the same people, although appointing the same people can help with efficiency and informed decision-making. Business owners should consider creating two real estate and financial LPAs, one for their personal affairs and one for their business affairs, as both the skills and the time lawyers need to devote will vary.
The loss of legal capacity or the death of an attorney (or the divorce of the donor and an attorney) may mean that neither attorney can act. Because attorneys cannot delegate their powers or appoint a successor, donors should always consider appointing substitute attorneys from the start.
LPAs can be registered at any time after their creation, but are only valid if they are registered with the Office for Public Guardians (OPG). It is generally beneficial to register as early as possible to avoid delays, especially with LPAs dealing with social benefits.
LPAs are only valid in England and Wales. Individuals with ties to other countries (including those who regularly spend time abroad or own property) need to consider what precautions can be taken in those countries to protect themselves in the event that they lose capacity.