Many clients understand the importance of later life planning. Few, however, plan for sudden incapacitation. Life is busy and, between the endless demands of work and family, there is little time to ponder the devastating consequences of illness or injury. Like all of life’s complications, these things often happen when least expected. Clients can, however, ensure that their family, business and home can continue to run smoothly while they get back on their feet, by having a Lasting Power of Attorney (LPA).
An LPA is a legal document that allows your client, the “donee”, to nominate someone, the “attorney”, to help make decisions or to make decisions on their behalf. There is no limit to the number of attorneys that can be appointed, but four is viewed as the maximum to avoid “too many cooks”.
There are two types of LPA: Health and Welfare, and Property and Financial Affairs.
A Health and Welfare LPA allows the attorney to make decisions relating to the donee’s health care and wellbeing, if they lack the mental capacity to make decisions for themselves. The Health and Welfare LPA can only come into force once the donee has actually lost mental capacity. Until that time, the donee can make all his/her own decisions, regardless of an LPA being in place.
A Property and Financial Affairs LPA on the other hand, is used to allow attorneys to make decisions regarding financial matters and property. This type of LPA can be used for personal affairs, less widely known is that it can also be used in relation to business affairs. What makes the Property and Financial Affairs LPA a particularly useful tool is that it doesn’t depend on the donee losing mental capacity. It can be used while the donee is out of the country, if s/he suddenly becomes ill or is incapacitated with injury.
Whilst LPAs are often regarded as part of later life planning for the elderly, they tend to be largely ignored for all other clients. This is a huge mistake. A Property and Financial Affairs LPA is also for the business owner, the family breadwinner – and everyone in between. The LPA can provide for a sole trader to leave the country while his/her business carries on trading; for the family to access bank accounts of a breadwinner who gets injured; and for the partner who gets struck down by illness and needs to pay his employees. Two separate Property and Financial Affairs LPAs can also be set up, one exclusively for business affairs and the other for personal finances, which means that every aspect of life is covered.
There are grave implications for families and businesses if the main breadwinner or majority shareholder loses their capacity to make decisions. Ensuring that there is a legal document in place for this type of obstacle will allow the family or business to continue as normal. A stark illustration of not having an LPA was experienced by one of our contacts who, while cycling into work, was badly injured and consequently off work for some time. Without an LPA in place, an expensive and laborious application had to be made to the Court of Protection to get a Deputyship Order. This could have been easily avoided had an LPA been put in place – and for a fraction of the price.
When choosing an attorney, clients should consider who they would like to be in control of their wellbeing or finances. If you are setting up an LPA for your client’s business then it would be prudent to nominate someone who has a good understanding of the business and whom your client can trust. If you are putting in place a Health and Welfare LPA then perhaps picking someone in your client’s immediate family, such as a spouse or children, would be more appropriate. If more than one attorney is nominated, it can be specified which decisions should be made jointly by the attorneys, and which decisions the attorneys can take separately.
The Property and Financial Affairs LPA is a great defence against unforeseen circumstances and should be added to any business person’s armoury.