This brief article outlines the steps that clients must consider in taking out lasting powers of attorney.

This publication has carried a number of articles examining controversy around lasting power of attorney. This is no accident: as diseases of ageing increase and cognitive decline takes its toll, the wealth management industry needs to raise its game in understanding how this issue affects intergenerational wealth transfer. There have been concerns that LPA powers have been abused and that the system requires reform. There are even questions about to what extent LPA or similar powers can be recognised across national borders. In today’s global world, the cross-border aspect of such legal powers becomes more important. 

In this brief comment, Gareth Ledsham, a partner at the trusts and estates disputes team at London-based law firm Russell-Cooke considers the issues. As always, the editors of this publication are pleased to share these views with readers but don’t necessarily endorse all opinions of guest contributors. Email tom.burroughes@wealthbriefing.com

A study by the Ministry of Justice has found that the number of people entrusting their affairs to an attorney via a lasting power of attorney has increased by 180 per cent in the last five years. The annual report of the Office of the Public Guardian (the body tasked with overseeing the registration of lasting powers of attorney) for 2016/17 reported some 648,000 new powers of attorney being registered which itself was an increase of 19 per cent on the previous year.

The lasting powers of attorney being granted differ from ordinary powers of attorney because they can still be used if the person making it loses mental capacity. 

With an aging population and, dementia becoming a leading cause of death in the UK, the increase on the uptake of such powers is encouraging; making a lasting power of attorney is something we should all think about, but it is especially important to those with a high net worth or more complex financial affairs. 

They come into their own when the unexpected occurs. For example, where someone becomes mentally incapacitated suddenly, such as after a car accident, families can be plunged into difficulty as a person’s funds cannot be accessed to settle the outgoings of everyday living. It is possible for a deputy to be appointed by the Court of Protection to manage a person’s affairs, but that process can take several months.

Making an LPA is a relatively straightforward exercise; indeed It is possible to make one online via the .gov website.

However, despite being a simple process, it pays to give careful thought to what powers over one’s affairs are being given, and to whom. This especially so for high net worth individuals with complex affairs. 

Lasting powers of attorneys are powerful documents; they can enable an attorney to deal with a person’s property and financial affairs as they would their own. Careful consideration, therefore, should be given to the person who is to be given this power.

It goes without saying that the person chosen as attorney should be trusted, but this is just the start. Consideration should be given to family dynamics: will the attorney be trusted by other members of the family? If they are not, the attorney may find their actions (even if innocent) being challenged in the Court of Protection by disgruntled family members with different ideas about what is in the donor of the LPA’s best interests. The real sting in the tail of these disputes is that the donor (i.e. the person who has appointed the attorney) of the LPA often ends up footing the bill.

If the donor is a business owner, thought should be given to if the intended attorney will fit in to the existing business structure.

Consideration ought also to be given to any obligations or restrictions that are placed on the attorney. For example, if the donor has a significant share portfolio, it may be sensible to insist that professional advice be sought in relation to investment decisions. Likewise, there may be some decisions that the donor does not wish the attorney to make, such as the sale of the family home. Another good idea is to consider some form of third party accountability – in a climate of increasing financial abuse by attorneys (which is particular risk for those of high net worth) having a trusted adviser in the picture can be a useful protection. 

In summary therefore, a lasting power of attorney can avoid many problems later in life, but for those with complex affairs, getting the right advice at the outset is almost as important as the power of attorney itself.