Lasting Power of Attorney - financial advice managing someone's finances

A Power of Attorney document is extremely useful when managing someone else’s finances, as well dealing with health problems they may have. This article is aimed at those who have been asked to take over the financial affairs of someone else, possibly because they have become incapacitated or have lost capacity in some other way. If you are looking for Lasting Power of Attorney financial advice then we can help.

Key topics covered in this article

1. What is a Power of Attorney document?

A Power of Attorney document allows a person to appoint someone, or a number of people, to manage their affairs if they are unable to act for themselves. The Power of Attorney document is usually set up to work if that person loses mental capacity. However, in other circumstances the Power of Attorney document could be used just for convenience – perhaps if that person is away.

Definitions for Power of Attorney documents

Donor

This is the person who sets up the Power of Attorney document. The Attorney manages the Donor’s affairs on their behalf.

Attorney

This is the person who appointed to manage the Donor’s affairs. The Attorney is legally responsible for their decisions on behalf of the Donor. To be an Attorney you do not need legal training. You just need to be trustworthy and reliable.

Anyone who is over the age of 18, who has mental capacity and is not a bankrupt can be an Attorney.

Types of Power of Attorney

In England and Wales there are 2 main types of Power of Attorney document:

Lasting Power of Attorney (LPA)

The Lasting Power of Attorney document is the modern version of the power of attorney. The Lasting Power of Attorney was introduced in 2007. The Lasting Power of Attorney must be registered with the Office of the Public Guardian (OPG) so that it can be used.

This document allows an attorney to take decisions on a donor’s financial affairs as well as their personal welfare. The Lasting Power of Attorney is split into 2 separate documents, each controlling the decisions that an attorney can make. A donor can set up one or both types of document, depending on their wishes. They can have different arrangements for each document. The Lasting Power of Attorney can be revoked at any stage providing the donor has the mental capacity to make this decision.

• Property and financial affairs
  This allows the attorney to control the donor’s financial affairs such as their bank accounts, investments, bills and home. This type of Lasting Power of Attorney can be used as soon as it is registered, but only with the donor’s permission. This article further examines issues surrounding Lasting Power of Attorney financial advice for this type of document.
• Health and welfare
  This allows the attorney to make decisions on areas such as the donor’s medical care and other aspects of their day-to-day living arrangements. You might use this with medical practitioners or a care home. This type of Lasting Power of Attorney can only be used when the donor is unable to make their own decisions.

Enduring Power of Attorney (EPA)

The Enduring Power of Attorney was the older form of document that existed before 2007. Enduring Power of Attorney documents can no longer be set up, although those that were in force when the rules changed can still be used.

The Enduring Power of Attorney was more limited than the Lasting Power of Attorney as the document only covers financial matters, not their personal welfare. The Enduring Power of Attorney does not need to be registered with the Office of the Public Guardian (OPG) until the donor loses mental capacity.

What happens if no Power of Attorney is in place (Deputyship)?

A Power of Attorney document must be set up before a person loses the mental capacity to take their own decisions. If this is not possible then there are legal procedures to appoint someone to manage the person’s affairs. This process is called Deputyship. The Court will appoint a trusted person to be that person’s Deputy and they will be responsible for managing the affairs of the person affected.

Deputyship is far less flexible than holding a Power of Attorney document, since the powers of the Deputy are much more limited. In addition, the decisions of Deputies are overseen by the courts.

Imagine having to take decisions on behalf of someone else, with a court looking over your shoulder. The process of Deputyship is onerous and restrictive.

It is far more flexible and convenient to set up a Lasting Power of Attorney document in advance of any future need.

Should you accept if you are asked to be an Attorney?

To be an Attorney is an important role. The person who is asking you is doing so because they trust you to look after their best interests if they become incapacitated. You may think that you might never have to act as the Attorney. However, before you accept, think about these issues:

• Do you have the skills?
  You need to be organised. You may be asked to manage the Donor’s money or investments – are you comfortable doing this?
• Do you have the time?
  Acting as an Attorney can take a large amount of time. Often the Donor has complex needs, which might mean you need to liaise with multiple agencies and institutions.
• Do you know the Donor’s wishes well enough?
  You should take care to speak to them about their wishes. It certainly helps if you know the Donor well.
• Are you willing to stand up for the Donor’s needs?
  You may be given conflicting advice or be asked to confirm decisions you do not agree with. You need to be confident that you can act in the Donor’s best interests.
• Can you work with other Attorneys?
  It is common for a Power of Attorney document to appoint more than one Attorney. You need to know who else has responsibility and consider whether this might lead to conflict.

2. How to set up a Lasting Power of Attorney

The process of setting up a Lasting Power of Attorney document is relatively straightforward, but does require some careful consideration. The person or people that you appoint as your attorney could have significant decisions to make on your behalf, so you need to be sure that they know your wishes and will follow them as you would want.

Most people set up a Lasting Power of Attorney with legal advice from a solicitor or will writer, but many create the documents by using the government website.

1. Getting legal advice on a Lasting Power of Attorney
   This is the route that most people use who want to ensure that their Lasting Power of Attorney is set up correctly with every issue considered. You will obviously have to pay for the advice you receive but this will be worth it in the long run if the documents are set up correctly.
2. Setting up a Lasting Power of Attorney without advice
   Obviously, this method is cheaper since you only have to pay for the registration of the documents but not legal advice. However, the downside is that you can inadvertently set up provisions without fully considering the consequences. The process can be straightforward if you have simple requirements. However, you may not know all options open to you.

You do not specifically need Lasting Power of Attorney financial advice, but we tend to discuss the options with our clients before they set up these documents. We aim to understand how the document might be used in the future.

We usually become involved with financial advice for a Lasting Power of Attorney when the document becomes active and the Attorneys start to manage the financial affairs of the Donor.

3. Managing someone’s finances using a Lasting Power of Attorney document

When can I start acting using the Lasting Power of Attorney?

If you are appointed as an Attorney under the property and finances document, you can start acting straight away, as soon as the document has been registered with the Office of the Public Guardian. You can tell that the document has been registered because each page will have an official stamp on it (“OPG validated”).

You can use the property and finances Lasting Power of Attorney while the Donor has mental capacity, although you need their permission. In some Lasting Power of Attorney documents the Donor will restrict the use to only be used when they lose mental capacity.

Health and welfare Lasting Power of Attorney documents can only be used when the Donor no longer has mental capacity.

Discussing the Lasting Power of Attorney with the Donor

Document the Donor’s wishes

It makes sense to discuss the Lasting Power of Attorney provisions before the document has to be used. Talk to the Donor and even document their wishes – it is important and helpful to your role as Attorney to know their requirements so that you can act on them.

Locate important documents and contact details

You may need to ask the Donor where they keep important documents like bank statements, bills and policy documents. This will help you to locate the right information you need to take over their finances.

You might also want to note the Donor’s important contacts like their solicitor or accountant.

Getting certified copies of a Lasting Power of Attorney document

Banks and financial institutions will need to see the original Lasting Power of Attorney document for you to act on it. Alternatively, they will accept a certified copy. You must use the paper form of the Lasting Power of Attorney if it was registered before 2016.

The Donor can certify a copy of a Lasting Power of Attorney by doing the following:

Write the following text on the bottom of every page of the copy:

“I certify this is a true and complete copy of the corresponding page of the original lasting power of attorney.”

On the final page of the copy, you must also write:

“I certify this is a true and complete copy of the lasting power of attorney.”

You need to sign and date every page.

Alternatively, you can ask a solicitor or notary to certify the Lasting Power of Attorney.

Getting a Lasting Power of Attorney access code

An alternative method to copying the Lasting Power of Attorney is to obtain an access code. This allows the financial institution to have access to the Lasting Power of Attorney in the same way as if you had provided the original or certified copy. This is a faster and more secure method of using a Lasting Power of Attorney.

You can use a Lasting Power of Attorney access code for any document registered from from 2016. The Lasting Power of Attorney documents registered after 17th July 2020 automatically provided the reference number and activation key in the registration letter.

Important duties of an Attorney

Being an Attorney is clearly a significant responsibility. Here are some important duties you should take seriously.

Act in the Donor’s best interests

This is an overriding principle when managing someone else’s finances. You should always act in good faith and using the Donor’s instructions as your guide. You should refer to the Lasting Power of Attorney document for the basic requirements and you must follow any instructions set out in the Lasting Power of Attorney document.

Consider any letters the Donor may have written with instructions. You have leeway to override any preferences the Donor may have set out as circumstances may change.

You should take into account the Donor’s moral, political and religious views. You can ask other people who know the Donor.

Overall, you should try to act in the way the Donor would have operated if they could take action.

Keep records

You should keep clear records of the Donor’s finances and accounts.

Keep accounts separate

You should keep the Donor’s finances separate from your own as an Attorney. The exception to this might be if you are a joint account holder with the Donor (perhaps the Attorney is the spouse of the Donor).

Record decisions

You should keep records of the decisions you make on behalf of the Donor in case these are later challenged. This might include decisions to buy equipment for the Donor, make gifts, plus to buy or sell investments.

If you are a joint Attorney the Lasting Power of Attorney document will specify how decisions must be taken. This might allow one person to take the lead, or instead require all Attorneys to agree.

Claiming expenses

You are allowed to claim expenses from the Donor’s accounts that are incurred in your duties as an Attorney, provided they are proportionate. For example, you might claim the cost of postage or travel to meetings held on behalf of the Donor. You cannot claim for social visits.

Paying professional advisers

You are allowed to pay professional advisers for tasks related to the Lasting Power of Attorney:

• Accountants
  Preparing tax returns
• Solicitors
  Legal advice relating to the Lasting Power of Attorney
• Regulated financial advisers
  Providing financial advice on investments

Which financial tasks can be performed using a Lasting Power of Attorney document?

If you are appointed as a Attorney over a Donor’s property and finances, here are some typical tasks you are likely to need to perform.

Managing their budget

A basic requirement of managing another person’s finances will be to manage their budget, including their bank accounts. You will be able to register the Lasting Power of Attorney with each financial institution and they will deal directly with you as if you were the Donor.

Dealing with state benefits and pensions

You will be expected to complete any forms necessary to claim state benefits and pensions.

Dealing with tax

You will be expected to declare and pay any tax due to the Donor. This could mean declaring any taxable income like savings, rent, or investments. You may need to complete a tax return for the Donor.

You can use the services of an accountant for this work and pay their fee from the money of the Donor.

Making investments

You can make, manage and sell investments on behalf of a Donor using a Lasting Power of Attorney document. Any investments will be held in the name of the Donor, with the Lasting Power of Attorney document used to sign applications and gain access to the accounts. Investments should be considered if the capital is large enough and also if you want to ensure that the Donor’s needs are covered for the long term.

You can use the services of a regulated financial adviser (like us) to arrange and manage investment portfolios. You can read more about how we provide investment services for Lasting Power of Attorneys below. Attorneys can arrange investments like ISAs, investment bonds and general investment accounts.

Making gifts

You can make small gifts using a Lasting Power of Attorney document, but the rules are strict.

Generally, you can make gifts on customary occasions like family birthdays, weddings, anniversaries or religious festivals. You should consider the provisions of the Lasting Power of Attorney document and also what the Donor would have done. You should consider whether the gift is affordable and reasonable. Examine the value of the gift and whether it is appropriate for the size of the Donor’s estate.

Making gifts might also include donations to charities, paying school fees or making an interest-free loan to someone.

Inheritance tax planning

Generally, larger gifts designed to avoid inheritance tax are not permitted without the prior permission of the Court of Protection.

There are strict rules concerning the “deprivation of assets”. Under a Lasting Power of Attorney document you cannot give away assets to avoid paying care costs. Essentially, this falls foul of the rules on care fees assessments. You might also be acting against the best interests of the Donor if you give away assets they might have otherwise used for their care.

The one exception to this is where there is a Lasting Power of Attorney document but the Donor still has the mental capacity to make decisions. In this case, the Donor should be able to make gifts that might save inheritance tax. It makes sense to consider this action while they are still able. Of course, the rules on deprivation of assets for care fees assessments will still apply. Therefore, you should take care with gifts if long-term care is required or being considered.

See further guidance on gifts from the Office of the Public Guardian.

4. Lasting Power of Attorney Financial Advice

If you are managing the affairs of someone with significant assets, you should consider taking financial advice to support your decisions. You cannot delegate the decisions you make as an Attorney. However, you are allowed to seek professional help with tasks like financial planning and investment management. A financial planner can help you to make decisions using the powers in the Lasting Power of Attorney document.

We provide Lasting Power of Attorney financial advice. Our Prosper service has been specifically designed to help you take financial decisions when managing another person’s assets as an Attorney.

Financial planning

The Donor may live for many years, despite having some kind of infirmity or mental capacity issues. They are also likely to have complex personal and financial needs, which may require care.

Lasting Power of Attorney financial advice can help you to manage your duties. We help those responsible for a Lasting Power of Attorney document to manage the financial security and longevity of assets of the Donor.

Sustainability of capital

A financial plan examines the Donor’s finances from every side. We take a look at their income, expenses, assets and liabilities and make sensible assumptions about the future. This financial plan looks at how long we expect the Donor’s capital to last given reasonable assumptions about the future (inflation, investment growth, changing needs).

As the Attorney, this helps you to establish whether the Donor is likely to run out of capital one day. If so, we may be able to recommend action within the rules of the Lasting Power of Attorney document, which helps you to make the capital last as long as possible.

This helps you to fulfill your duties as an Attorney and also acts in the best interests of the Donor as we seek to ensure that their needs can be managed no matter what happens.

Managing the budget

Preparing a financial plan can help you to organise the budget of the Donor. You can prepare for changes that may happen in the future so that you have a plan to cover these costs.

Managing income and capital withdrawals

As the Attorney, you will need to manage the income and capital withdrawals of the Donor within acceptable rules to ensure that their needs are fulfilled. Lasting Power of Attorney financial advice can help you to set up and manage a strategy to prepare for short-term needs, while examining the long-term impact on the Donor’s capital.

We can help you to establish the best source of income or capital withdrawals using assets like investments, ISAs or pensions. We would consider the tax implications and the long-term effect on the Donor’s capital.

Investment management

If the Donor has existing investments or cash you should consider setting up or managing investments on their behalf. This is allowed under Lasting Power of Attorney rules, and you can seek advice from a regulated professional who is experienced in dealing with the needs of Donors.

Our investment management services is designed to help  Attorneys to manage investments for long-term capital growth above inflation. Lasting Power of Attorney financial advice also builds in flexibility and tax-efficiency where possible so that you can take account of the changing needs of the person you are helping.

Investing cash

Many Donors we see have significant cash. It will be important to keep cautious cash reserves so that you can safely manage the Donor’s financial needs. However, cash tends to under-perform compared to inflation. therefore, most Lasting Power of Attorneys invest for the long term using excess cash reserves.

Property sales

It is common for a Donor to go into care when activating a Lasting Power of Attorney document. This can lead to their property being sold, which again releases capital for tax-efficient investment. We help Attorneys to invest wisely to ensure that they obtain long-term capital growth with the flexibility to take withdrawals to pay for short-term costs. Investing money can be more flexible than using property for a power of attorney situation.

Reviewing and managing existing investments

When you take over the investments of a Donor you may wish to review their existing arrangements to determine whether these are still appropriate to meet their long-term needs. We can help you to review the existing investments with a number of goals in mind. Lasting Power of Attorney financial advice might help to you maintain the sustainability of capital given the changing circumstances, manage risks, tax-efficiency and simplify administration.

Typical investments for a Lasting Power of Attorney situation

Unless the Lasting Power of Attorney document restricts investment powers, you should have the ability to choose from any appropriate investment. You must take account of the Donor’s wishes and the rules of the document. Investments are owned by the Donor, but the Attorney can sign using the Lasting Power of Attorney document.

Here are some typical investments we might consider for a Lasting Power of Attorney:

• ISAs
  You can invest in ISAs as an Attorney, and this is sensible as it will reduce the Donor’s income tax and capital gains tax.
• General investment accounts
  These are tax-efficient, flexible investment accounts that work well for Lasting Power of Attorney situations. You can use tax allowances and easily take withdrawals to fund expenses. You can eve use the account to fund future ISA contributions, saving further tax.
• Investment bonds
  We sometimes use investment bonds for a Lasting Power of Attorney situation as they can be effective investments that also save care fees. This is because investment bonds may be excluded from any assessment for care fees. However, the rules are strict and you cannot use investment bonds to avoid care fees where these costs have started or are being considered.

Contact us

If you are considering Lasting Power of Attorney financial advice, please contact us. We can discuss your situation and establish whether we can help you to manage the affairs of the Donor efficiently.