What is a lasting power of attorney and why is it important?
A power of attorney is a document that gives legal authority to other individual(s) to act on your behalf if you are unable to do so. If you do not have such a document in place, then no one else will be able to help you. If you lose mental capacity to make decisions, then it will be necessary for someone to be appointed by the Court of Protection as a deputy to act on your behalf. This is a lengthy and expensive process and can add to the stresses already being experienced in this sort of situation.
Since 2007, the most common type of documents to make are known as lasting powers of attorney (LPAs). There are two separate types of documents that you can make: an LPA for property and financial affairs and an LPA for health and welfare. Both documents need to be registered with the Office of the Public Guardian (OPG) to be validated. However, once the LPA for property and financial affairs has been registered, your chosen attorney(s) can generally act on your behalf both when you have capacity to act for yourself (but only with your consent) and they can also continue to act if you ever lack capacity.
Some of my clients have described these documents as being analogous to an insurance policy. Hopefully, it will never be necessary to use an LPA. However, if an attorney is required to act for any reason, they are very pleased that they have got these documents in place so that someone can seamlessly intervene.
Is a business LPA right for my business?
Many people are increasingly familiar with LPAs in the context of their personal situations. However, if you are a business owner, having an appropriate document in place could be equally or almost more important. What if you are away on holiday or on business and a decision needs to be made or action taken? Perhaps more worryingly, what if you were to have an accident or suddenly become mentally incapacitated? These situations could have a serious impact on your business unless you have already made appropriate plans or someone else within the business has equivalent decision-making authority. What about the payment of bills, entering into agreements with third parties, signing cheques or even paying staff salaries? If you cannot deal with these, who else can?
In most cases, having an appropriate business LPA in place can enable things to continue without any interruption. If you are a sole trader, the business is unlikely to have a separate legal entity to yourself and therefore there are fewer issues to consider. However, if you are in a partnership or a director of a limited company, you should make sure that there are no potential conflicts within your partnership agreement of articles of association which could cause issues that need to be addressed within the business LPA.
Can an LPA cover personal and business affairs?
People are increasingly aware of the importance of having LPAs in place in relation to their personal affairs – often appointing their spouse or civil partner and children or friends to act on their behalf. However, for business owners, it might not be most appropriate to have these people acting on their behalf in relation to their business affairs.
It is possible to have one document where certain people are appointed to make certain decisions and other people are authorised to make other decisions. However, it might be difficult to make the scope of an individual’s authority clear enough and the OPG might reject the document.
What could be simpler is to make two separate documents: one dealing with your personal affairs and the other dealing with your business interests. In this way, you can appoint different people to deal with each aspect of your life. Within these individual documents, you can then specify the extent of the attorney(s)’ authority.
Tessa Whiskard, Partner in the personal planning team: Call on 01625 614250 or email tessa.whiskard@anthonycollins.com.