A guide to 3rd-Party Mandates; Ordinary Powers of Attorney; Enduring Powers of Attorney; and Lasting Powers of Attorney.

How and when can we legally act on another's behalf, and what are the frameworks that allow us to do so?

Overview

"HELP! I need somebody", cried John Lennon, way back in 1965. We all know the feeling, sometimes we do need a little bit of help to do something we can't quite manage ourselves. As we get older, the need for a little help can become more frequent, and often with things we used to take for granted, for example managing our money and paying bills etc.

The danger area is that of "mental capacity", which is the power and capability to make your own decisions. Commonly, loss of capacity is thought to mean that someone develops dementia, and while this is a valid scenario, it is not the only scenario that causes a lack of mental capacity. A fall, heart attacks, stroke, head injury - even complications from Covid, as seen with Kate Garraway's husband Derek Draper - can all cause loss of capacity, and often when you least expect it. Most of the options we will look at are only designed to function whilst the account holder has their mental capacity. This means that if these options are relied solely upon and the account holder later loses capacity, access to their accounts will cease.

"Don't assume! If you’re married or in a civil partnership, you may have assumed that your spouse would automatically be able to deal with your bank account and pensions, and make decisions about your healthcare, if you lose the ability to do so. This is not the case. Without an LPA, they won’t have the authority." - Age UK

So what options are open to us? Are we actually allowed to give access to our accounts to other people, especially given the new GDPR (General Data Protection Regulation) that became law in May 2018? The answer is yes, we can, and there are a few different way in which to do so. We'll discuss the choices we have and their pro's and con's as we go. Let's take a look at our options...

3rd-Party Mandates

The simplest form of access is via a 3rd-Party Mandate. They are most commonly used for bank accounts, or utility bills etc., and it allows another named party access to your account. An account holder simply fills in a form with their bank, the named party signs and access is granted almost straight away. It is usually free to do this. However, the mandate is limited to the bank/utility/other where it has been created, it is not a blanket authority to access accounts, so you'll need to do a new mandate per institution you deal with. The mandate will cease should the account holder later lose mental capacity.

Pro: Simple to set up; no cost.

Con: Need one mandate per institution dealt with; will cease if the account holder loses mental capacity.

Ordinary Power of Attorney

An Ordinary Power of Attorney (OPA) is a means of authorising another person (known as an attorney) to access your accounts on your behalf. An OPA is often created only as a temporary document, and has an expiry date attached to it, however they do not have to have an expiration date. They are useful if you are going on an extended holiday, such as a round-the-world cruise, or if you know you are going into hospital for a specified period. An OPA is a blanket authority to all your accounts, and you can limit the powers of your attorneys under the terms of the document, but it can only be used whilst you have the capability to supervise your attorneys.

Pros: Blanket access across all accounts; can limit the powers of attorneys.

Cons: Cannot be used if subject loses mental capacity.

Enduring Power of Attorney

Enduring Powers of Attorney (EPA's) were discontinued in 2007 and replaced with the more flexible Lasting Power of Attorney, although some people do still have EPA's, so they do warrant their place in this discussion. An EPA needed to be drawn up while the donor (the subject of the EPA) had mental capacity, but crucially it could not be registered with the Office of the Public Guardian (OPG) until the donor had lost mental capacity. This means it could not be used legally until the donor was actually unable to supervise their attorney's actions.

Therefore, unlike an OPA which could be used until a person lost their mental capacity, an EPA could be used only once the donor lost their capacity. This effectively meant that if there was a physical limitation stopping the donor from speaking on the phone, or going to the bank, their attorneys still were not able to act on their behalf under the terms of an EPA - unless they could prove that the donor no longer had mental capacity. EPA's were prone to abuse, and their inflexibility, coupled with the fact that there was no provision for dealing with the donor's Health & Welfare issues, meant the Government eventually scrapped them.

Pros: Useful once the donor had lost mental capacity; blanket access to accounts.

Cons: Only useful once the donor had lost mental capacity; open to abuse; no provision for Health & Welfare issues.

Lasting Powers of Attorney

Lasting Powers of Attorney (LPA's) were first available in October 2007, following the scrapping of EPA's (as detailed above). An LPA is essentially a combination of the best features of an OPA and an EPA in that it can be used both when the donor is able to supervise their attorneys, and also when the donor has lost mental capacity, enabling their attorneys to act unsupervised. Lasting Powers of Attorney must be registered with the Office of the Public Guardian before they can be used by your attorneys.

LPA's are essential, as this quote from Age UK describes: "If you’re married or in a civil partnership, you may have assumed that your spouse would automatically be able to deal with your bank account and pensions, and make decisions about your healthcare, if you lose the ability to do so. This is not the case. Without an LPA, they won’t have the authority."

An LPA for Property & Financial Affairs gives your attorneys blanket authority to access all your accounts; but also allows for the ability to limit their powers if it is necessary. It can be specified that attorneys should have access to digital devices, accounts and passwords - again something that is becoming increasingly important these days. It provides for blanket access to all the donor's accounts, and as it will continue to be usable when the donor has lost capacity, it is an incredibly powerful document.

If we had to criticise LPA's we would say that they are not the easiest of documents to navigate; and choosing the wrong option can have disastrous consequences that may not be discovered until it is too late. A donor does have the option not to register the documents with the OPG immediately, however, we would strongly advise against this as delaying registration could result in any mistakes on the forms lying undiscovered until it is too late.

Pros: Can be used while donor has capacity; can be used if donor later loses capacity; blanket access to accounts across all media & devices; can be tailored to limit access or powers of attorneys; can last from the date of registration until date of death.

Cons: Must be registered with the OPG before they can be used; LPA application forms & choices can be tricky to understand.

Conclusion

Lasting Powers of Attorney are a useful tool, which when completed correctly, can save families from the stress of not being able to manage a loved one's financial affairs. And believe us when we say we often deal with stressed families who end up having to fend off bailiffs on the door step because simple household bills cannot be paid on time, if at all.

For personalised advice on Lasting Powers of Attorney, call 01925 321 231 or email enquiries@elliottgeorge-ep.com and one of our friendly advisers will be happy to help you. Elliott-George Estate Planning currently charge £195 per Lasting Power of Attorney document.