Why Do You Need A Power Of Attorney?

Most people know what a Will is and why they might need one, but you may not be as familiar with Powers of Attorney documents, also known as POAs. You may also hear of this type of document being referred to as an LPA, which is an abbreviation of Lasting Power of Attorney, a particular type of POA.

Powers of Attorney are a group of important legal documents that allow an individual to nominate someone else to act on their behalf in certain situations. The person who makes a Power of Attorney is called a donor. The person a donor chooses to act on their behalf is called an attorney. Many donors choose to nominate more than one attorney.

This type of legal document is very important as it allows nominated individuals to make important decisions for the donor, such as the type of health interventions and care they receive and how their property and finances are handled. If an individual was to no longer have the mental capacity to make these decisions themselves, such as after a major injury, their next of kin would not automatically be given these powers.

When are powers of attorney used?

There are various reasons why it may be necessary for an attorney to act on a donor’s behalf. When and how this can be done depends on what kind of power of attorney has been made.

Some POAs allow an attorney to manage the donor’s affairs whenever the donor gives permission for them to do so. This might be useful if the donor planned to be overseas for a significant period of time, or perhaps if they simply wanted to share responsibility for managing their financial affairs.

Many POAs are written to be used only in the event of the donor no longer being able to make their own decisions. This is most commonly associated with elderly donors who may have failing health or a condition such as dementia. However, this type of POA is also hugely helpful in the case of unexpected accidents or health crises, for example, if the donor was involved in a road traffic incident and sustained a brain injury.

LPAs are made by individuals. They usually cover personal interests but can also be prepared to accommodate the individual’s business interests.

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What types of power of attorney documents are there?

There are a number of different types of Powers of Attorney.

Lasting Power of Attorney

A Lasting Power of Attorney (LPA) is a POA made by a donor to ensure their attorney would be able to make decisions on their behalf should they no longer be able to do so.

There are two types of LPA, Health and Welfare and Property and Financial Affairs. A donor can choose to make both types of LPA or just one.

Ordinary Power of Attorney

An Ordinary Power of Attorney allows a donor to grant the right for an attorney to manage their property and financial affairs on their behalf. This is a flexible document that a donor can choose to bring into effect at any time, not just when they are no longer able to act for themselves.

Ordinary Powers of Attorney can grant powers to an attorney for a specified or unspecified period of time. However, they would become invalid should the donor no longer have mental capacity.

Enduring Power of Attorney

Enduring Powers of Attorney were a precursor to LPAs. They were written to come into effect when the donor no longer had mental capacity to make their own important decisions.

Though it has not been possible to write a new Enduring Power of Attorney since 2007, any documents that were written prior to that date can still be registered and used if required. However, this is only possible assuming the Enduring Power of Attorney was prepared correctly at the time.

Business Lasting Powers of Attorney (BLPAs)

Business Lasting Powers of Attorney are a type of LPA where a clause is added to specify that the attorneys only have the right to make decisions relating to the donor’s business.

A BLPA can be made by a sole trader, a partner in a partnership or by someone who is a shareholder in a limited company.

When is the best time to make a power of attorney?

Many people choose to make a Lasting Power of Attorney at retirement age. This is often prompted by declining health or a new diagnosis.

However, there is a danger of leaving it too late to be able to make an LPA. A decline in mental capacity due to a condition such as dementia or Alzheimer’s Disease can happen very quickly. In the case of health crises such as brain injuries or strokes, there is often no warning at all.

If an LPA is needed but it is too late to make one, those close to the individual would need to make an application to the Office of the Public Guardian to be granted the right to act on their loved one’s behalf. This is not always a straight-forward process and rights are not always granted. Even if it is a relatively straight forward situation, applying to the Office of the Public Guardian will take upwards of three months, possibly significantly longer.

In order to avoid the risk of not having a LPA in place should it be needed, it’s recommended that you make an LPA just in case, just as you would make a Will. Any adult can choose to make a Power of Attorney, and it will remain valid for many years into the future, whether or not it’s ever required.

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