Pt 3. Laws and legal concepts relevant to financial advice - Powers of Attorney

Question 1

What is a power of attorney?

Answer 1

• Under Power of Attorney Act 1971, a person can give power to another individual to act on their behalf.
• Power is only granted while the individual is mentally capable of handling own affairs, and withdrawn on mental incapacity.
• Automatically revoked on death or bankcruptcy of donor or expiry of specified time, and donor can cancel attorney at any time.

Question 2

Who are power attorneys for?

Answer 2

• Someone who leaves the country for a long period of time.
• An elderly person who wants someone to handle their affairs for them.

Question 3

What is the Mental Capacity Act 2005?

Answer 3

• This came into force on 1st October 2007, and revised law on mental capacity and enduring powers of attorney.

Question 4

What is the Enduring Powers of Attorney Act 1985?

Answer 4

• Introduced to enable a person to hold a power of attorney which would continue in event of mental incapacity of donor.

e.g. Enduring Power of Attorney (EPA)

Question 5

When is an individual characterised as mentally incapable?

Answer 5

• Cannot understand relevant information.
• Cannot retain information.
• Cannot evaluate that information in making the decision.
• Cannot communicate that information.

Question 6

What requirements need to be made to qualify as an EPA?

Answer 6

• Established before 1st October 2007 (different type of power applies after this date.)
• Established while the individual had full mental capacity aged 18 or over, and was not bankcrupt.
• Satisfied the conditions of Enduring Powers of Attorney Act 1985.

Question 7

What protection is given to donors in the EPA?

Answer 7

• Attorneys are forbidden by the Act to use the power to make gifts.
• Power can be revoked by the individual at any time, but once registered the consent of Court of Protection is required.

Question 8

What is lasting powers of attorney?

Answer 8

• Introduced by the Mental Capacity Act 2005.

An agreement where the donor may give the attorney power to make decisions about their:

• personal health and welfare (such as long-term health care and treatment).
• property and financial affairs.

Question 9

What are the requirements of the Lasting Powers of Attorney?

Answer 9

• To cover both welfare and financial matters, the health and care decisions LPA and financial decisions LPA are required.
• The donor of power must be over 18 with capacity.
• The attorney must be over 18 and not bankrupt.
• LPA must comply with regulations under Act, and registered with Office of Public Guardian.
• LPA must state that donor and attorney have read all info and attorney understands their duties.
• Cerificate from prescribed person confirming donor understands LPA, that there has been no fraud or undue pressure.
• LPA includes power to make decisions about welfare, extending to giving or refusing consent for medical treatment.
• LPA cannot be used to make gifts except on customary occasions to persons related or connected to donor, such as charity, birthday, Christmas.
• IHT under LPA’s is rarely possible.
• Court of Protection can authorise gifts not allowed under LPA.
• Donors can cancel LPA if they have capacity.

Question 10

When can donor revoke LPA?

Answer 10

• Donor’s bankruptcy.
• Death or bankruptcy of attorney, but only if they are sole attorney.
• Dissolution of marriage or civil partnership between donor and attorney.
• Attorney’s incapacity, but only if they are the only attorney.

Question 11

What powers do the Court of Protection have?

Answer 11

• Appoint a deputy to take care of a person who lacks capacity, done in cases where there is no valid EPA or LPA.
• Deputy cannot make settlements of person’s property or exercise their powers as a trustee.
• Advanced medical decisions made when person had capacity, and was over 18 are valid after loss of capacity.