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Written by Zara Fletcher, Holmes & Hill, Executive Senior Associate in the Private Client Department
For many individuals and families, estate planning is primarily associated with Wills, tax efficiency and the organised transfer of wealth on death. However, one of the most important legal tools in any personal planning framework concerns not what happens after death, but what happens during life if you lose the ability to manage your own affairs.
A Lasting Power of Attorney (LPA) ensures that trusted individuals are legally authorised to make decisions on your behalf should you become unable to do so yourself. Despite its importance, it is often overlooked or delayed until it is too late.
What is a Lasting Power of Attorney?
A Lasting Power of Attorney is a legal document that allows you (the donor) to appoint one or more people (known as attorneys) to make decisions on your behalf. There are two types of LPAs:
- Property and Finance which covers matters such as bank accounts, investments, property, and the payment of bills.
- Health and Welfare which covers decisions relating to medical treatment, care arrangements and, where authorised, consenting or refusing life-sustaining treatment.
- Both documents must be registered with the Office of the Public Guardian before they can be used.
Why LPA’s Matter
For high net worth individuals and families, the consequences of not having an LPA in place can be particularly significant. If a person loses mental capacity without having executed an LPA, no one automatically has the authority to manage their financial affairs. Instead, an application must be made to the Court of Protection to appoint a deputy. This process can take many months and once the Deputyship Order is obtained requires ongoing reporting and potentially ongoing professional costs. In the meantime, key decisions regarding investments, business interests, property transactions or tax matters may be delayed.
Therefore, having a properly drafted LPA allows attorneys to step in quickly and manage matters efficiently if needed.
Protecting Business and Investment Interests
Many clients hold directorships, business interests or active investment portfolios that require timely decision making. Without an LPA, the inability to execute documents, authorise transactions or manage banking arrangements can create operational challenges.
A Property and Financial LPA specific for business needs can ensure that trusted individuals are able to continue with business operations. LPAs should also be considered alongside articles of association or shareholder agreements to ensure consistency. If these documents are already in place they would need to be reviewed before a business LPA is prepared.
Choice, Control and Safeguards
One of the advantages of a LPA is that it allows the donor to retain significant control over how decisions are made.
For example, you can, appoint more than one attorney, specify whether attorneys must act jointly or jointly and severally. Provide guidance or binding instructions on how certain decisions should be approached. You can also appoint replacement attorneys if your first choice cannot act for any reason.
For many families, this provides reassurance that decisions will be taken by people who understand their values, financial arrangements and personal wishes.
Health and Welfare Decisions
The Health and Welfare LPA addresses a different but equally important set of considerations. Without this document in place, family members may have limited legal authority when it comes to decisions about care, medical treatment or living arrangements. While healthcare professionals will consult family where appropriate, the absence of formal authority can complicate matters. For many clients, a Health and Welfare LPA is also an opportunity to ensure that personal preferences and values are clearly understood by those who may one day need to make decisions on their behalf.
Timing Matters
A crucial point is that an LPA must be made while the donor still has mental capacity. If capacity has already been lost, the option is no longer available and the Court of Protection route becomes unavoidable. For this reason, LPA’s are best viewed as a routine part of responsible estate planning, rather than something to be considered only later in life.
A Core Part of Modern Estate Planning
For families with substantial wealth and complex affairs, the ability to ensure continuity of decision making is essential. Lasting Powers of Attorney provide a practical and relatively straightforward way to achieve this. Alongside Wills, trusts and tax planning structures, LPAs form a central pillar of a well considered personal planning strategy which offers protection not only for assets, but also for the individuals and families.
Taking the time to put the right arrangements in place now can provide lasting reassurance for the future and your family will thank you.
We also strongly advise that if you have an old-style Enduring Power of Attorney, you upgrade this to an LPA. Although EPAs are still effective they cannot be used effectively until they are registered (after you have lost capacity) and this can take several months and in reality, be just as costly as upgrading now to LPAs which can be used immediately.
Written by Zara Fletcher, Holmes & Hill, Executive Senior Associate in the Private Client Department
