1 What is power of attorney?
Nobody wants to think about a time in their future when they won’t be able to make their own decisions. It can also be a difficult subject to bring up with an older relative, but it’s something that everyone should think about.
However, if your relative’s situation is complicated – for example if they need long-term help or have multiple accounts – the best way to manage their finances will be by organising power of attorney. Your relative needs to set this up themselves, while they are still capable of making their own decisions and can understand what they are doing.
If things aren’t set up properly in advance of when they are needed, it can lead to all sorts of complications. Thankfully there are procedures in place to protect individuals and make it easier to deal with things, should the need arise.
As there is no power of attorney applicable to the entire UK, instead this guide contains information for power of attorney in England and Wales. If your relative lives in Northern Ireland or Scotland, see Power of attorney in Northern Ireland or Power of attorney in Scotland.
What can power of attorney do?
Power of attorney (POA) allows your relative to choose someone else to deal with third parties on their behalf, for example banks or the local council. Certain types of powers of attorney go further, allowing your relative to choose someone else to make decisions on their behalf, should they be unable to do so in the future.
In England and Wales the types of power of attorney that are available are an Ordinary Power of Attorney, a Lasting Power of Attorney and (historically) an Enduring Power of Attorney.
Get a Will from Which?
If you are involved with helping your relative manage his or her financial affairs, perhaps now is a good time to be thinking of making a will for yourself if you haven’t done so already. Make sure your treasured possessions go to the ones you love – see how we can help at Which? Wills.
A power of attorney can be put in place by your relative at any time, as long as they are capable of making their own decisions (have ‘mental capacity’) at the time the document is signed.
Your relative can give 'power' to one or more people. It’s important that he or she chooses people they can trust to act in their best interests.
Lasting Power of Attorney (LPA)
There are two types of Lasting Power of Attorney.
Property and Financial Affairs Lasting Power of Attorney: this covers things such as managing day-to-day finances, debts, benefits (such as the attendance allowance and personal independent payments (PIP)), buying or selling property. It needs to be put in place and registered while the donor has mental capacity and it can be used both before and after the donor has lost capacity.
Health and Welfare Lasting Power of Attorney: this covers issues such as NHS treatment, care and housing. Again, it needs to be put in place and registered while the donor has mental capacity but it can only be used after the donor has lost mental capacity.
Often, your relative will want either one or both types of Lasting Power of Attorney in place. When your relative sets things up they can stipulate which ‘powers’ they want to give; for example, they might only want their attorney to deal with their bills, but not to have the power to sell their property, or they may only want the attorney to deal with their affairs once they start to lose capacity. Once the Lasting Power of Attorney is drawn up and signed it will still need to be registered at the Office of the Public Guardian before it is effective: see Using a Lasting Power of Attorney.
Ordinary Power of Attorney (OPA)
If an individual wants someone to look after their financial affairs for a certain period of time, they can give them Ordinary Power of Attorney. An Ordinary Power of Attorney might be required if an individual:
- has a physical illness
- has had an accident that leads to physical injury
- is abroad for a long period of time.
However, Ordinary Power of Attorney should not be used if an individual:
- has been diagnosed with a health problem that can lead to mental incapacity
- is worried that they may develop a such a health problem in due course; or
- wants to put in place arrangements to ensure their affairs are attended to by someone else of their choosing in the event they lose mental capacity in the future.
This is because they won't be able to continue using an Ordinary Power of Attorney if they lose their mental capacity. Under these circumstances, it is more appropriate to use a Lasting Power of Attorney (LPA).
Enduring Power of Attorney (EPA)
This type of power of attorney existed in England and Wales until 2007. It is no longer possible to get a new one, but if you or your relative has an old one in place it will still be valid should you need to register it in future. There are a number of differences between an Enduring Power of Attorney and a Lasting Power of Attorney. First, an Enduring Power of Attorney is only applicable to financial affairs, whereas a Lasting Power of Attorney can relate to either financial affairs or health and welfare. Second, an Enduring Power of Attorney is effective immediately and it does not have to be registered until such time it is believed that the donor is losing mental capacity. If the donor does not want the Enduring Power of Attorney to be effective until such time as they are losing capacity, then the powers are limited in such a way that they only become operative when it is believed that the donor is losing capacity.
Health and Welfare Lasting Power of Attorney
If you have any concern that a relative might lose their mental capacity (he or she is in the early stages of dementia, for example), it would be well worth ensuring that a Health and Welfare Lasting Power of Attorney is in place. The result of not doing this can be a time-consuming and drawn-out process, which requires you to go through the Court of Protection.
Consult an independent financial adviser
If your relative’s situation is complicated, they might want to consult an independent financial adviser (IFA) before making a power of attorney. For more advice on finding an IFA, see this page on the Which? website.