Trusts

A Power of Attorney enables an individual (known as the donor) to allow someone (the attorney) to make decisions on their behalf in respect of their property and money. In this chapter, we look at the different types of power of attorney that can be arranged and how they affect the decision-making process for a client. We start by looking at Ordinary Powers of Attorney.

Ordinary Powers of Attorney

An Ordinary Power of Attorney is a legal document executed by the donor, giving the attorney the authori...

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...om they are dealing and the transaction they are performing remains valid.

If the power is to expire on a certain date specified in the deed, a purchaser who deals with the attorney after that date is deemed to have had notice of the revocation of the power and the transaction may not be valid.

An Ordinary Power of Attorney will come to an end if the donor becomes mentally incapable. Up until 1 October 2007, only an Enduring Power of Attorney could remain in place if the attorney became mentally incapacitated.

An Enduring Power of Attorney allows the attorney to make decisions about the donor’s finances and property. If the attorney becomes aware that the donor is - or is becoming - mentally incapable, they need to register the Enduring Power of Attorney with the Office of the Public Guardian (OPG). As soon as the Enduring Power of Attorney has been registered, the attorney can continue to act despite the donor’s mental incapacity. Registration with the OPG must be made by the attorney as soon as possible because any decisions the attorney makes once the donor has become mentally incapable, and before registration with the OPG, are invalid.

A don...

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...st capacity.

However, under the Adults with Incapacity (Scotland) Act 2000, the rule regarding the continuance of power of attorney beyond a donor’s incapacity was reversed. Now, a power of attorney appointed after 2 April 2001 will not continue beyond the donor’s mental incapacity unless the deed expressly provides for this.

A power of attorney established in Scotland prior to 1 January 1991 will become invalid on mental incapacity, though the attorney may continue to act under negotiorum gestio , which is an informal arrangement allowing one person to act on behalf of another on the basis that they would have given authority to do so.

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On 1 October 2007, the Mental Capacity Act 2005 came into force in England and Wales and introduced a new Lasting Power of Attorney. Scotland has had a similar power of attorney, in place since the Adults with Incapacity (Scotland) Act 2000, called a Welfare and Continuing Power of Attorney.  

A Lasting Power of Attorney has two separate forms:

A financial decisions LPA - this enables the attorney to deal with the donor’s property and financial affairs, such as paying bills and collecting benefits. A donor can appoint an attorney to manage their financial affairs at any time, including before they lose capacity

A health and care decisions LPA – this enables the attorney to make decisions on behalf of the donor on matters concerning personal welfare, such as decisions about long-term care and medical treatment. The donor can decide which aspects of care the attorney can make decisions about; however, in respect of a health and care decisions LPA, the attorney cannot act where the donor has capacity, only if they lose capacity

Both types of LPA are combined into one two-part application ...

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... size of the donor’s estate.

It will be necessary to obtain advanced approval from the Court of Protection if a gift is to be made in respect of inheritance tax planning.

What are the benefits of an LPA?

A Lasting Power of Attorney gives authority to make decisions about an individual’s property and affairs. It allows individuals to plan in advance:

What decisions they would like made on their behalf should they lose capacity

Who will make those decisions?

How those people will make the decisions

What if capacity is lost with no LPA in place?

If a person loses capacity with no LPA or effective EPA in place, it is then too late for them to appoint an attorney themselves. In this situation, an application has to be made to the Court of Protection for a deputy to be appointed, which is time-consuming and expensive. It also means that:

The incapacitated person has no influence over who is made responsible for managing their affairs and making decisions on their behalf

The incapacitated person’s assets are inaccessible until the deputyship order is in place

There is an annual fee to pay and whoever is appointed as deputy is under strict supervision

The Mental Capacity Act 2005 (MCA) provides a statutory framework to empower and protect vulnerable people who may not be able to make their own decisions. It makes it clear who can take decisions in which situations and how they should go about this. It enables people to plan ahead for a time when they may lose capacity. The protection afforded through this Act is achieved through the activities of three main organisations:

The Court of Protection

The Public Guardian

The Independent Mental Capacity Advocate (IMCA)

The MCA provides a substitute decision-making framework for adults who lack the ability to make a decision for themselves. Their lack of capacity must be caused by an impairment of, or disturbance in, the functioning of the mind, so includes those suffering from psychiatric illness, learning disabilities, dementia, brain injury or mental illness, but also includes those who may have lost mental capacity temporarily due to drugs or alcohol. It applies to physical and mental health as well as to financial matters.

‘Substituted decision-making’ is where someone makes decisions on such a person’s behalf, based on what is in their best interests, because they cannot make decisions for themselves. The MCA formalised a substitute decision making scheme for health care based on personal autonomy, based on three fundamental concepts:

Decision-making capacity

Best interests

Anticipatory decision-making

‘Supported decision-making’ is where such a person is assisted in making their own decisions.

The MCA presumes the ability to decide, but when this is in doubt, requires an assessment of the decision-making capacity. This assessment determines whether a health care professional needs to act in a person’s best interests, or in a way that respects informed, freely given, patient choice.

It tests the ability to:

Understand relevant information, and

The ability to make decisions on the basis o...

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...otection.

The MCA (Mental Capacity Act) Code of Practice states that a deputy should:

Only make decisions in the person’s best interests

Only make decisions allowed by the court

Always apply a high standard of care when making decisions (keeping notes and documents, etc.)

 A deputy cannot make or change the person’s will, make large gifts out of their money, or hold any property or money on behalf of that person.

The Office of the Public Guardian

The OPG protects people who lack the mental capacity to make their own decisions within the framework of the Mental Capacity Act 2005. Its functions include regulating and supervising court-appointed deputies, maintaining a register of EPAs and LPAs, dealing with complaints about attorneys and deputies, working with other organisations such as the police and social services, and providing support to the Court of Protection in respect of the way in which attorneys and deputies carry out their duties.

The Public Guardian is personally responsible for the management and organisation of the OPG. The Public Guardian Board scrutinizes the Public Guardian and reports to the Chancellor.

Independent Mental Capacity Advocate (IMCA)

An IMCA is someone appointed to support a person who lacks capacity but has no one to speak for them, such as family members. The IMCA makes representations about the person's wishes, feelings, beliefs and values, at the same time as bringing to the attention of the decision-maker all factors that are relevant to the decision. The IMCA can challenge the decision-maker on behalf of the person lacking capacity if necessary.

Decision-makers in the NHS and in local authorities (e.g. doctors and social workers) have a duty to consult the IMCA for the most vulnerable, and IMCAs are also involved in a change in a person’s accommodation where it is provided by either of these public bodies.

An IMCA can challenge decisions made by an attorney or deputy.

This covers the care and treatment of mentally disabled persons and the management of their property and other matters.

The Act provides the legislation under which people diagnosed with a mental disorder can be detained in a hospital or in police custody and have their disorder assessed and/or treated against their wishes (known as ‘sectioning’).

The Act allows for individuals, known as guardians, to be appointed to make decisions in this regard, such as requiring ...

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...ical treatment, training, work

Has access to a doctor or other Approved Mental Health Practitioner

Detention under the Mental Health Act 2005

Under the MCA, a hospital or care facility must obtain authorisation to detain someone with impaired mental capacity in certain circumstances. This is called ‘Deprivation of Liberty Safeguards’ (DoLS) and applies unless the Mental Health Act 1983 applies to the patient’s situation, in which case that takes precedence.

The Mental Capacity (Amendment) Act 2019 amends ...

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... the regime, and is effective from October 2020.

This Act amends the earlier o...

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...they may challenge a section.

The FCA requires firms and advisers to ensure vulnerable custo...

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...aving suffered a recent bereavement/divorce/traumatic event