Appointing a power of attorney is an essential task when planning for your future; arguably just as important as writing a Will. However, there are many different types of power of attorney, which can lead to confusion over which type you need. In this blog, we will outline the different types of power of attorney.
In its simplest form, a power of attorney is a document where you give someone else the power to make decisions on your behalf. There are many different circumstances that might lead to you needing someone to make decisions on your behalf. As a firm, these are the two main reasons we have come across:
Temporary situation: Sometimes, you might be unable to make decisions and do everyday tasks for yourself, such as if you are in hospital or temporarily out of the country, and need someone to access your bank account to pay your bills. Once things return to normal, you no longer need that person to act for you.
Longer-term plans: To protect against age-related frailty, or a future diagnosis of dementia, where you may lose the mental capacity to make your own decisions for your future, you wish to choose somebody now who can step in to manage your affairs just as you would.
Different types of power of attorney
There are three key different types of power of attorney:
Ordinary power of attorney covers decisions about specific financial affairs and is valid while you have mental capacity. This is most suitable if you temporarily need assistance making decisions. This is suitable for someone who needs help while they are, for example, in hospital, out of the country, or otherwise unable to attend to decisions and needs someone to step in to help.
Lasting power of attorney, or LPA, covers decisions about your financial affairs, or your health and welfare. This type of power of attorney comes into effect both if you lose your mental capacity, or if you no longer want to make decisions for yourself. These allow for a degree of flexibility and allow you to plan appropriately for the future. So, regardless of the situation, having a financial and health and welfare LPA will ensure you are covered.
Enduring power of attorney (or EPA) is the old terminology used for LPA, which was replaced in October 2007. An EPA signed before this date should still be valid, but – for new applications – this is now replaced by an LPA. An EPA acts in the same way as an LPA and comes into effect if you lose your mental capacity, or if you want someone to act on your behalf for certain decisions.
Ordinary powers of attorney
When you set up an ordinary power of attorney you appoint one or more people (attorneys) to make financial decisions on your behalf. This type of power of attorney is only valid while you still have the mental capacity to make your own decisions. Of course, there are many different and personal reasons to set up an ordinary power of attorney, but some reasons may include:
Giving someone the ability to make financial decisions while you are unable to. For example, if you were temporarily in the hospital or out of the country and wanted to make sure your bills were paid on time.
You may need someone to act for you, for example, to complete a property transaction whilst you are temporarily in the hospital or out of the country so unable to sign certain legal documents. A trusted individual could be appointed to do this for you just whilst you are unable to do so.
Ordinary powers of attorney are a great option to help you overcome obstacles that might impact your financial decisions. However, these are limited as they are only valid while you still have mental capacity. Therefore, it is important to consider setting up an LPA while you still have the mental capacity to do so, to help you plan appropriately for the future.
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Lasting powers of attorney
An LPA is a legal document that is registered (validated) with the Office of the Public Guardian. Moreover, an LPA gives somebody you trust, your attorney, the ability and legal authority to make decisions on your behalf. This covers both if you lose mental capacity or if you would prefer for your attorney to make your decisions for you.
There are two types of LPA:
Health and welfare
Property and financial affairs
You can choose whether you need just one type of LPA or both. This also gives you the ability to give decision-making powers to different individuals, for example, you prefer to have a professional attorney to help you make financial decisions but a family member to help you make health decisions or vice versa.
Property and Financial Affairs LPA
This type of LPA covers things such as:
- Buying and selling property
- Paying the mortgage
- Investing money
- Paying bills
- Arranging repairs to the property
- Dealing with pensions and applying for benefits
You can specify and restrict the type of decisions your attorney can make or let them make all decisions on your behalf. For example, you may be happy for an attorney to sell your property and pay your bills, but you may be uncomfortable letting them invest money, so you can restrict them from doing this.
It is important to note that, as LPAs are regulated by the Office of the Public Guardian (OPG), attorneys are required to keep detailed accounts and to make sure their money is kept separate from yours. importantly, you can ask to be sent regular details of how much is spent and how much money you have – these details can be sent to your solicitor or a family member if you lose mental capacity, as an extra layer of protection.
Health and Welfare LPA
This type of LPA covers things such as:
- Where you should live
- Your medical care
- What you should eat
- Who you should have contact with
- Or what kind of social activities you should take part in
Importantly, you can also allow your attorney to make decisions about life-saving treatments.
Business LPA
Power of Attorneys are not just reserved for individuals; they are also available for company directors, partners or sole traders to protect the best interests of their businesses. Some individuals may find themselves unable to make certain decisions, which can leave businesses exposed to risk. Find out more about Business LPA’s here.
Importantly, in order to gain a Lasting Power of Attorney, regardless of its type, one must act before they are needed. Speak to Nicholls Law today via our portal to find out how we can help you future-proof your life.
*Notice: This blog does not constitute as legal advice*