Knowing that there is a plan in place for managing your financial and property matters in case you're unable to do so can give you and your family real peace of mind. A lasting power of attorney can help you to do just that.
In this guide, we’ll look at the key differences between the types of powers of attorney in the UK, with a deep dive into their uses and benefits, and explain whether you might want to change your arrangements.
What is lasting power of attorney?
Enduring power of attorney (EPA) gave someone the right to make decisions about the property and finances of someone else. It has now been replaced by a lasting power of attorney (LPA).
LPA replaced EPA in 2005. It leans heavily on the Mental Capacity Act and extends the power of attorney to health and welfare. Both types of power of attorney remain in law; the main distinction is that you can no longer apply for an EPA.
Today, there are two types of power of attorney issued:
Ordinary power of attorney – a temporary power of attorney granted when someone is hospitalised or out of the country.
Lasting power of attorney – LPA is typically used when a person loses mental capacity, giving a loved one or friend the right to manage their affairs.
What is mental capacity?
Mental capacity in a legal sense can be defined as the ability to make a decision you need to make at the time you need to do it.
There are many scenarios in which someone may lack mental capacity:
Severe learning disability
Mental health condition
Unconsciousness or a coma
Up to 2007, LPA was covered by EPA. It was replaced due to its limitations and the need for the legislation to be modernised.
Although some people will be managing the affairs of others through pre-existing EPAs, we’ll go into detail on whether you need to anything about this if an EPA applies to you later.
What is an enduring power of attorney?
Until 2007, it was possible to assume the responsibility for managing someone’s affairs through an Enduring Power of Attorney. The EPA only grants someone the ability to manage someone else’s finances and property, meaning those with an EPA cannot make decisions about their healthcare.
An EPA could be granted to more than one person; in this case different parties could manage different areas of the person's finances.
The individual that the EPA was set up for, sometimes known as the donor, had to have the mental capacity to make this decision, in full understanding of what they were agreeing to.
This was a catch 22, because some EPAs could only be granted when the person started to lose mental capacity. So, where was the line drawn? And how could a person understand the impact of signing over responsibility for their affairs if they were already beginning to decline mentally?
The situation was made more complex by the fact that the person was required to use their attorney to action the process. However, their hands were often tied because it was clear they no longer had the faculty to make the decision.
Moreover, EPAs actually did not give attorneys the authority to make judgements about their client’s mental state. As you can see, the former process of granting an EPA was a muddled mess.
Differences between lasting and enduring power of attorney
There are some key differences between LPA and EPA that you will need to be aware of if you are responsible for managing someone else’s finances through one of the powers.
Lasting power of attorney vs enduring power of attorney:
Transferring power - the person applying for an LPA doesn’t have to apply to the court when the person who has transferring power reaches the point that they are no longer mentally capable. Under an EPA the opposite is true.
Registration - the LPA can only be registered with the Office of the Public Guardian. To activate an LPA, the holder must appoint a witness to support their claim that the subject of the LPA is no longer mentally capable.
Holders - an EPA could be held by more one person; an LPA is typically held by one person who can nominate others to offer support and make decisions in different areas.
Coverage - the holder of an LPA can make decisions that affect the medical care and lifestyle of a person, including where they can live and the medical treatment they receive. An EPA is only focused on property and finances
Registration - an LPA only becomes active when registered. The EPA was valid as soon as it was signed. However, EPAs only need to become active when the person loses the ability to manage their affairs
Is enduring power of attorney still valid?
Yes, EPA is still valid today, however, you can no longer apply for this type of power of attorney. It has been replaced by LPA.
EPAs were replaced by LPAs in 2007. However, if you signed an EPA before October 2007, it will still be valid.
Can you convert enduring power of attorney into lasting power of attorney?
An EPA can in certain circumstances address the needs you and your donor have. As they’re still valid, you are under no obligation to convert an EPA into an LPA.
There are reasons you might want to, however; LPAs have several advantages that EPAs don’t.
More flexibility to the holder.
Wider cover – medical care, not only finances and property, can be registered and acted upon immediately.
LPAs only come into effect when it’s proven independently that they’re necessary.
It’s possible to retain an existing EPA and apply for an LPA to cover health and welfare needs.
If you’re unsure about the level and type of power of attorney you require and whether you should convert your EPA into an LPA, it’s always best to seek legal advice.
Can you cancel enduring power of attorney?
Unregistered EPAs can be cancelled at any time before they are used. You’ll need to sign a deed of revocation. This can be done by the donor, if they have mental capacity, or the holder. The Court of Protection has the authority to cancel an EPA.
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