A Power of Attorney is a formal legal document that allows you (“the Donor”) to appoint someone to act on your behalf (“an Attorney”) to make decisions for you. Those decisions may be in respect of your property and financial affairs or your health and welfare.
An Ordinary or General Power of Attorney allows the Donor to appoint an Attorney to manage their financial affairs. This type of Power is used only whilst the Donor has their mental capacity and perhaps when it is difficult for them to manage their financial affairs themselves, such as when they are away or if they are physically disabled in some way.
The person appointed as their Attorney should be someone the Donor trusts, such as a close relative, friend, or solicitor. The Donor decides who to appoint as Attorney, and whilst they retain their mental capacity the Donor can cancel the arrangement at any time.
In some cases, the power of Attorney will cease to have effect after a certain amount of time, or it may be limited to certain activities or types of matter that the Attorney can deal with on the Donor’s behalf. An Ordinary Power of Attorney is only valid if and for so long as the Donor is fully aware of the implications of the arrangement and it will come to an end if the Donor becomes mentally incapable of managing his own financial affairs.
Mental incapacity affects not only the elderly – premature dementia or an accident may have the same effect.
Some Powers of Attorney can continue to be used even where the Donor has lost their mental capacity. These are known as Enduring Powers of Attorney or Lasting Powers of Attorney.
Following the Mental Capacity Act 2005 it has not been possible to make Enduring Powers of Attorney. These had previously been very popular and useful straightforward documents. They were effective immediately they were executed and operated in the same way as an Ordinary Power of Attorney until the Donor was becoming or had become mentally incapable of managing their property and financial affairs at which point the Power continued or “endured”. However they were subject to abuse by unscrupulous Attorneys and the Act introduced a replacement in the form of Lasting Powers of Attorney. These are more comprehensive and are only effective when registered with the Office of the Public Guardian.
Lasting Powers of Attorney can be used even after the Donor has become mentally incapable of managing their own affairs - whether temporarily or permanently, or because of an illness, disability or accident. Lasting Powers of Attorney have now replaced Enduring Powers of Attorney, although valid Enduring Powers of Attorney made before 1 October 2007 can still be used and registered at the Office of the Public Guardian once the Donor has lost capacity.
For a Lasting Power of Attorney to be valid, the Donor must fully understand the implications of the arrangement at the time of making it. A certificate provider will need to sign the document to certify that the Donor is aware of the implications of making the Power and that nobody is forcing the Donor into making it. Various other requirements must be met to ensure that the document is comprehensive, clear and formal.
The Attorney cannot start making decisions on the Donor’s behalf until the Lasting Power of Attorney has been lodged and registered with the Office of the Public Guardian. There are two types of Lasting Powers of Attorney dealing with Health and Welfare and Property and Financial Affairs.
We recommend the Law Society’s guide to financial matters for the elderly which contains reference to these issues.