Will you always have mental capacity?
What would happen to your assets and personal affairs in England and Wales in the event of loss of mental capacity while you are still alive? Who would look after your best interests?
Will you always have mental capacity?
Many of our clients come to see us for their succession planning because, understandably, they would like to ensure that their assets can be passed down and managed as wealth-protectively and tax-efficiently as possible for their chosen heirs in the event of their death. We welcome and encourage this sort of forward thinking, and we are delighted to assist with putting suitable bespoke Wills, trusts (or other structures) and letters of wishes in place.
But we must not stop there, and neither must you. Indeed, we would not be doing our job properly if we did not raise the question: what would happen to your assets and personal affairs in England and Wales in the event of loss of mental capacity while you are still alive? Who would look after your best interests?
As busy, successful individuals, you can of course be forgiven for putting these matters on the backburner. After all, particularly if you have already put Wills in place, and you are comfortable that your loved ones are protected, then you may not consider yourself a priority. You are busy looking after your career and family: you do not have the time to entertain the possibility that something could happen to you, let alone worry about it or plan for it. This is understandable, but not sensible. Losing mental capacity is not a certainty, but it is a real and increasing risk. So what can be done?
You may think you have already “ticked that box” if you have in the past created some sort of power of attorney. But there are various types available, and significant differences between them, so you should take care to ensure that what you have is fit for purpose and can operate how you want it to. And if you do not have any power of attorney in place at all, then now is definitely the time to take action.
We can advise on your assets and affairs in England and Wales, but if you live or have assets in other jurisdictions then you should also review the position locally.
What are your options in England and Wales? The power of an attorney.
Let’s start with the terminology. Standard powers of attorney (sometimes referred to as General Powers of Attorney) offer short-term solutions in specific circumstances, for example, if you wish to authorise a partner, colleague, agent or family member to sign a particular contract on your behalf because you are going to be away travelling and you cannot do so yourself. As you can imagine, these powers of attorney have very limited scope. They also cease to have effect if you lose mental capacity so, in that scenario, they are useless.
Lasting Powers of Attorney (LPAs) and Enduring Powers of Attorney (EPAs) can be used even after a person has lost capacity. Indeed, in England and Wales, since 1st October 2007, LPAs are the only way to guarantee that someone who you trust will be able to act on your behalf if you lose mental capacity. There are two types of LPA that we recommend all our clients put in place:
- A Financial Decisions LPA would give your chosen attorney(s) the right to act on your behalf in England and Wales regarding your day-to-day spending, any property sales or acquisitions, and the management of your bank accounts and any investments. A Financial Decisions LPA can be used as soon as it is registered and, if you wish, without the need to assess mental capacity. This has proven incredibly helpful in practice as it means that doctors do not need to be involved, and there is no requirement for a continued assessment of (or awkward conversations about) mental capacity.
- A Health and Care Decisions LPA would give your attorney(s) the power to make decisions in relation to your diet, clothing, living arrangements (such as choosing a care home) and medical treatments (including, if you wish, the right to give or refuse consent to life-sustaining treatment on your behalf) in England and Wales. A Health and Care Decisions LPA can be registered immediately, but can only be used if you have lost mental capacity to make the particular decision in question.
So what about EPAs? Prior to 1st October 2007, EPAs were the only way of appointing an attorney to be able to act on your behalf in the event of loss of capacity in England and Wales, but only for financial matters. If you have an EPA in place, you may think that you are covered. In our experience, however, EPAs do not offer the same extent of protection as LPAs, and nor are they as workable in practice.
Indeed, in order for an attorney to be able to use an EPA, they would have to register it with the Office of the Public Guardian and, by law, that is only possible if the person who put it in place has lost (or is losing) mental capacity. This can cause unhelpful delays, precisely at the time when the EPA is required! LPAs, on the other hand, can be registered immediately so that they are ready for use as soon as necessary. In addition, if you wish, Financial Decisions LPAs can even be used without the need to show lack of capacity.
Another drawback of EPAs is that they do not extend to decisions about your health and medical treatments, so if you would like someone you trust to be able to make decisions for you in that regard, then you will need a Health and Care Decisions LPA.
In 2007 the law changed to address these problems with EPAs, and it is no longer possible to create new EPAs in England and Wales. However, a surprising number of people still only have EPAs (or worse, nothing) in place, so you should check what your position is. In the absence of a suitable LPA or EPA, the people who you would want to act on your behalf would have to undertake a potentially time-consuming and expensive application to the Court of Protection.
Another option? (If you know what you want.)
In addition to LPAs, many of our clients also choose to put in place Advance Decisions (sometimes historically referred to as Living Wills or Advance Directives). By creating an Advance Decision you can specify circumstances in which you would wish to refuse certain medical treatments (including, if you wish, life-sustaining treatments) in the future. It would only take effect if you lack mental capacity at that time in the future, so if you change your mind while you still have capacity then you can amend your wishes accordingly. Otherwise, if you lose capacity and the Advance Decision is valid and applicable in a particular set of circumstances, it would have the same weight as if you still had capacity and were giving the same instructions in person. The relevant healthcare professionals would be obliged to follow it.
An Advance Decision would be a sensible document to put in place if you have very clear views about particular medical treatments that you would not wish to be given in certain circumstances in the future, and if you would like to have more certainty that those decisions will be honoured rather than asking someone else to make them for you.
Advance Decisions differ from Health and Care Decisions LPAs in that they do not require you to choose any attorneys or other third parties. Some clients find this attractive if they cannot decide who to appoint as their attorney(s) for such personal matters. Others are content to appoint friends or family members to make certain decisions about their health and medical treatments, but would like to retain control over others, so a combination of LPAs and Advance Decisions can also be helpful.
Either way, given that Advance Decisions effectively commit your future self to a particular set of wishes, we recommend that you discuss the sorts of decisions and treatments you are considering with your doctor or other professional who has relevant medical expertise. It is also very important to review your Advance Decision(s) every few years.
In addition, if you choose to put both an Advance Decision and a Health and Care Decisions LPA in place then it is important that they are completed in the correct order so that they do not inadvertently invalidate each other.
We strongly advise you to put Wills and LPAs in place for your assets and affairs in England and Wales if you have not already done so. Even if you have, or if you have EPAs in place, it is still worth reviewing them and making sure that they are up-to-date and suit your current and future needs.
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