What does Power of Attorney mean?

What is a power of attorney?

A power of attorney is a legal document where a person (the donor) grants someone (the attorney) the power to make decisions on their behalf. 

Most people are aware that they should ensure they have a valid Will in place, but few consider what would happen in a situation where they were unable to manage their own affairs in relation to financial and medical decisions. This is where a power of attorney is required and in the eventuality that a person loses mental capacity to make such decisions, their wishes can be protected using a power of attorney.

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What is ‘mental capacity’?

Mental capacity means your ability to understand information, retain it and then assess it to make a decision. Mental capacity is not a fixed state - someone may lack capacity permanently or intermittently. Furthermore, they may have capacity to make some decisions but not others. 

What are the different types of power of attorney?

There are 2 different types of power of attorney:

1. Lasting power of attorney
2. Ordinary power of attorney

You can set up more than one power of attorney. Lasting power of attorney (LPA) is most common, and is relevant to those who need someone to make decisions on their behalf when they no longer have mental capacity. 

Ordinary Power of attorney (OPA)

An ordinary power of attorney (OPA) applies to making financial decisions only, and will only be valid whilst the donor has mental capacity. If the donor loses mental capacity, the OPA will be revoked.  This can be useful if someone needs help with looking after their finances temporarily, for example, because they are having an operation or travelling abroad.

Donors can limit the powers they give their attorneys under an OPA, for example, empowering them to handle their bank account but not to buy or sell property on their behalf. 

If it is envisioned that the donor is likely to lose mental capacity and requires someone to make decisions on their behalf to protect their best interests, a lasting power of attorney will be more appropriate.

Lasting power of attorney (LPA)

You can set up a lasting power of attorney (LPA) for property and financial affairs, for health and welfare decisions, or for both. An LPA for health and welfare decisions may only be used if you lack mental capacity, whereas an LPA for property and financial affairs can be used if you retain mental capacity, if you give consent. 

In order to create a valid LPA, the donor must be at least 18 and have full mental capacity with an understanding of the legal implications of the document. The document has to be signed by the donor, the attorneys, the witnesses and the person providing the certificate (usually a solicitor).

If a finanial LPA is created, the attorney can make all financial decisions on behalf of the donor, including:

• The sale and purchase of property
• Pensions and benefits
• Bank accounts
• Mortgages and other debts

A financial LPA can take effect before a person loses mental capacity and can be restricted to certain decisions. The attorney cannot make any decisions that would benefit themselves and must keep the finances of the donor completely separate from their own.

Where a health and welfare LPA has been created, the attorney must take into account the wishes of the donor and always out in their best interests. They can make decisions regarding the donor’s:

• Medical care
• Life-sustaining treatment
• Diet
• Housing arrangements

Why do I need a lasting power of attorney?

The creation of a lasting power of attorney allows the donor to retain some control over their future and to define their wishes where they are not able to do so themselves.

Unfortunately, no one knows what the future holds. There is a common misconception that family members can make decisions for a loved one if there was an accident or illness that affected their ability to make decisions for themselves. This is not automatically the case and to be grated that power an application is needed to the Court of Protection to be granted the relevant order. This can be incredibly stressful during what is already likely to be a difficult time.

The fact that the donor has to have full mental capacity for it to be valid can take people by surprise. It is unlikely you would be able to satisfy the necessary criteria for a valid power of attorney where the donor is showing early signs of dementia or has been involved in an accident.

Who should be your attorney?

It is very important to think very carefully about who you choose to be your attorney. This person will have a large responsibility and is being given a vast amount of power over some critical aspects of your life. You should make sure that you choose someone that is confident about making decisions on your behalf and is happy to follow your wishes.

It is possible to have more than one attorney and the donor can decide which attorney is responsible for which decisions. The donor can also limit the scope of decisions that the attorney(s) can make.

Where there is more than one attorney, they may not always agree where decisions have to be made. It is therefore recommended that the lasting power of attorney determines the arrangements for decisions to be made, including how independent decisions can be made.

Can a lasting power of attorney be terminated?

It is possible for the donor to revoke the lasting power of attorney at any point while they still have mental capacity. If the donor become bankrupt, then a financial lasting power of attorney is automatically terminated.