The power of attorney (POA) is a vital yet often overlooked legal instrument. As the population ages and life becomes increasingly complex, understanding the nuances and importance of the power of attorney is critical to safeguarding personal autonomy and financial assets. This blog seeks to shed light on this essential legal tool, emphasising its practical implications and relevance.
What is Power of Attorney?
In the UK, a power of attorney is a legal document that allows a person, known as the ‘donor’, to appoint one or more individuals, referred to as ‘attorneys’, to make decisions on their behalf. These decisions can cover health, welfare, property, and financial matters. There are different types of POAs, with the most common being the Lasting Power of Attorney (LPA), which remains valid if the donor loses mental capacity.
Why is it Important?
- Safeguarding Financial Interests: As society grows more intricate, managing finances and assets can become a complex task. A POA ensures that a trusted person is in place to handle these matters, ensuring that bills are paid, investments are managed, and financial affairs are kept in order.
- Protecting Health and Welfare: An LPA for health and welfare empowers attorneys to make decisions about medical treatment, care, and daily routines if the donor is unable to do so. This can be vital in ensuring the donor’s preferences and values are upheld in times of crisis.
- Providing Legal Clarity: Without a designated POA, families may face legal confusion and disputes during trying times. The clear structure and authority provided by a POA can alleviate these challenges and promote harmony within families and between involved parties.
- Preparing for Unexpected Circumstances: Illness, accidents, or sudden loss of capacity can happen to anyone at any time. Having a POA in place is a proactive measure that ensures one’s wishes are honoured, regardless of unforeseen events.
How to Set Up a Power of Attorney
Setting up a Lasting Power of Attorney is a process that requires careful consideration and legal guidance. The document must be registered with the Office of the Public Guardian (OPG), and there are specific requirements for both the donor and the appointed attorneys.
It is strongly advised to consult with a professional specialising in this field, as they can provide expert guidance tailored to individual needs and circumstances.
A General Power of Attorney (GPA), also known as an Ordinary Power of Attorney, is a type of Power of Attorney that will allow a person to appoint attorneys to make decisions on their behalf. These are not as widely used as a Lasting Power of Attorney (LPA) but do have certain uses and benefits.
A GPA allows a donor to appoint attorneys to make financial decisions on their behalf. The document could be general, allowing the attorneys to make decisions on any of the donor’s property and finances, or it may be limited to only specific decisions. A sole attorney could be appointed or multiple. If multiple attorneys are named, they could act jointly, or jointly and severally depending on the wording of the GPA.
The document will last until the donor dies, loses mental capacity, until it is revoked or until it ends under the terms of the document.
A GPA can be particularly useful for a shorter, finite period of time especially when the donor is of sound mind and body. For example, a GPA could be created and used while waiting for an LPA to be registered with the OPG. Another use for it may be if the donor is out of the country for a while and needs an attorney to act on their behalf in the UK in respect of property and financial matters only.
Living Wills (Advanced Directives)
A Living Will, more formally known as an Advanced Directive, is similar to a Lasting Power Health And Welfare, but with two distinct advantages. It is cheaper than an LPA and you do not require attorneys. So worth considering either instead of an LPA Health And Welfare or in addition to one.
The importance of understanding and implementing a power of attorney cannot be overstated. In an era of increasing life expectancy and complex financial landscapes, this legal instrument is more than a mere convenience: it is a necessary tool for protecting autonomy, wellbeing, and financial security.
A power of attorney is not solely a concern for the elderly or those with substantial assets. It is a fundamental part of legal planning for everyone, allowing individuals to retain control and provide clear direction for the unexpected twists and turns that life may take.
The time to act is now. By educating oneself on the matter and taking proactive steps, everybody can provide themselves and their loved ones with the protection, clarity, and peace of mind that only a properly executed power of attorney can offer. You know it makes sense.*
The Financial Conduct Authority does not regulate taxation advice, estate planning, Lasting Power of Attorney or inheritance tax planning. The information provided in this article is for educational purposes only and should not be considered financial or investment advice. Please consult with a qualified professional before making any investment decisions. The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this blog is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.