Power of Attorney – Which type is right for you?

By creating a Power of Attorney you can give somebody legal authority to act on your behalf to deal with your financial or personal affairs. This can be especially useful during lockdown for someone at home who would prefer to have their Attorney act for them when communicating with third parties or organisations. For example, you may be more vulnerable to COVID-19 infection than other people and therefore at higher risk than average if you leave your home. By appointing an Attorney who is at lower risk of infection than yourself, they can then act for you outside the home. If you are not more vulnerable to COVID-19 but have limited physical mobility, it can also be very practical to appoint an Attorney.

There are different types of Power of Attorney and, as you might expect, no one-size-fits-all. Which type or types are right for you will depend on your particular circumstances and requirements. The following overview highlights the main pros and cons of the most well-known types of power. However, this isn’t comprehensive – there are other specialist types of Power of Attorney for specialist situations which are not covered below. Examples of these would be where executors of a deceased’s estate or trustees of a trust need to appoint an Attorney to deal with the estate or trust.

Probably the most well-known type is a Lasting Power of Attorney (LPA), which is mentioned below and covered in detail on the UK government website here. For detailed advice on LPAs and which type of Power of Attorney would be right for you, we would advise talking to your solicitor.

How do I create a Power of Attorney?

A Power of Attorney is often drawn up by a solicitor, who can advise on the practicalities and ensure that the document is legally valid. Please note that using a solicitor is not a legal requirement, however the person creating the power (the “donor”) signs a legal document (a “deed”) appointing one or more people to act as his or her “Attorneys”. Of course, “With great power comes great responsibility” so you should only choose Attorneys you trust and who are capable of acting.

The donor must have sufficient mental capacity to understand what they are signing. Alternatively, a Deputy can be appointed by the Court to manage the affairs of someone who does not have sufficient capacity to appoint an Attorney themselves. Deputyships are a separate subject and not covered in this article. The UK government website explains how a Deputy or Deputies can be appointed to make decisions for someone who lacks capacity here.

General Power of Attorney

The simplest (and often overlooked) type of power is a General Power of Attorney (GPA), also known as an Ordinary Power of Attorney. This is a legal deed giving one or more people power to deal with your property and financial affairs.

The deed can be time-limited, say for 12 months, after which it is no longer valid. The power can also be limited in scope to create a Specific or Limited Power of Attorney. An example of this would be to limit the power to a specific property if you were appointing an agent to manage that property.

Pros:

• A wide-ranging power
• Simple to prepare
• Valid as soon as the deed has been signed and witnessed

Cons:

• Invalid if donor loses capacity
• Power can be too wide-ranging or long-lasting
• Health and welfare not covered

Lasting Power of Attorney

Lasting Powers of Attorney (LPAs) were introduced on 1 October 2007 and come in two types:

• Property and Financial Affairs
• Health and Welfare

Crucially, LPAs continue to be valid even if the donor loses mental capacity or can no longer make relevant decisions themselves.

LPAs cannot be used until they have been registered with the Office of the Public Guardian (OPG). Once registered, the Attorney(s) can act immediately or as required by the donor. Registration can take many weeks so many donors choose to proactively register LPAs even if there is no immediate requirement for an Attorney.

LPAs can be limited in scope to restrict the power of the Attorney(s) to the donor’s business affairs. A donor can therefore create a business LPA and a personal LPA.

Pros:

• Still valid if donor loses capacity
• Can include health and welfare
• Widely accepted by banks etc.

Cons:

• More complex to prepare
• Registration with OPG can take 6-8 weeks
• OPG usually charges a registration fee

Enduring Power of Attorney

Enduring Power of Attorney (EPAs) are similar to LPAs but were replaced in 2007 by LPAs. An EPA created before 1 October 2007 is, in principle, still valid.

Unlike LPAs, EPAs cannot be proactively registered in case of a (future) unexpected loss of mental capacity. If the donor loses mental capacity then the EPA must be registered with the Office of the Public Guardian before it can (continue to) be used. The period waiting for registration can be when the EPA is most needed.

Pros:

• Still valid if donor loses capacity (once registered)

Cons:

• Cannot be registered until donor loses, or begins to lose, capacity
• Banks etc may require proof of mental capacity
• Health and welfare not covered

COVID-19

People can have limited mobility for any number of reasons but especially at the present time during lockdown. You may therefore wish to appoint an Attorney to help you manage your day-to-day or financial affairs.

A General Power of Attorney is simple to create and effective immediately. A Lasting Power of Attorney is more comprehensive but typically takes 2-3 months to create and register.

As a “belts and braces” approach you can always create both a General Power of Attorney and a Lasting Power of Attorney. The GPA can later be revoked once the LPA has been registered.

If you want to know more on Power of Attorney (POA), please contact us for advice as to the best POA for your individual needs and circumstances.