If you are appointing someone to manage your affairs, then you must have the mental capacity to make that decision. Mental capacity means the ability to make or communicate specific decisions at the time they need to be made. A person must understand the decision they need to make, why they need to make it, and the likely outcome of their decision.
Everyone is assumed to have capacity and there are no conditions which mean that someone will never have capacity again – someone might have capacity for some decisions and not others, or their capacity might change on a day-to-day basis. Difficulty communicating a decision doesn’t mean someone lacks mental capacity, nor does someone making a decision that family or friends don’t agree with. It’s a person- specific test, and it is not a “one size fits all”. If there are questions over someone’s capacity to make a decision, then it is likely that a medical professional will be asked to give a report to help people reach a decision.
So, if you’d like to know the difference between your enduring powers of attorney and your lasting powers, or whether a third-party authority might be the is the right option for you, read on.
Ordinary power of attorney
This covers decisions about your financial affairs and is valid while you have mental capacity. This kind of power of attorney might be particularly useful if you need temporary help with your finances – for example, if you are going abroad for up to a year and you want someone to manage your accounts while you’re gone, or if you are going to have surgery and during your time in hospital and recovering at home you will need someone to help you pay things in at the bank, or go shopping with your bank card.
You can specify which accounts your attorney has access to and how they access them with an ordinary power of attorney. For example, you might want someone to be able to use your current account, but not to take money out of a savings account.
It is important to note that if someone does lose mental capacity, any ordinary powers of attorney given by that person will be automatically revoked.
Lasting power of attorney
There are two types of LPA: ones that cover decisions about your financial affairs, and ones that cover decisions about your health and care. LPAs relating to financial affairs can start immediately if you want them to, or you can set them to only start when you have lost mental capacity. However, health and care LPAs can only start operating after the person who has created the LPA has lost mental capacity.
The big difference between lasting powers of attorney and ordinary powers of attorney is that lasting powers of attorney continue working after the person who created them has lost capacity – that’s why they are called “lasting” powers.
Lasting powers of attorney are managed by part of the Ministry of Justice called the Office of the Public Guardian (the OPG). The OPG are responsible for making sure that LPAs meet their requirements and registering the LPAs (which currently attracts a fee of £82), and making sure that attorneys act in accordance with the terms of the LPA.
Setting up an LPA is ideal if you want to make sure you're covered in the future. You can specify how you would like your attorneys to act, meaning that your wishes can be carried on if you no longer have the capacity to make decisions yourself.
Enduring power of attorney
Enduring Powers of Attorney (EPAs) were replaced by LPAs in October 2007. However, if you made and signed an EPA before 1 October 2007, it should still be valid. An EPA covers decisions about your property and financial affairs, and it comes into effect if you lose mental capacity, or if you want someone to act on your behalf.
An attorney acting under an EPA has very similar powers to an attorney acting under an LPA, and the OPG also manages EPAs, and is responsible for registering an EPA before it can be used.
EPAs can only be registered once the person that made the EPA has lost capacity. This means that if there are any problems with the EPA it cannot be corrected – or potentially even that the EPA cannot be found to be registered. We recommend that anyone who still has an existing EPA replaces this with an LPA, as once this is registered you have the peace of mind of knowing that arrangements are in place for your future.
A third-party authority is a short-term agreement between you and someone you trust (the ‘nominee’). This could be a family member or close friend who can access your bank accounts and pay bills or withdraw money on your behalf.
It is similar to an ordinary power of attorney, but it is limited to the bank account you have given the person authority to access. If you need someone to be able to operate more than one account for you, an ordinary power of attorney may be more suitable, or if you would like a long term solution, it might be worth thinking about a lasting power of attorney instead.