A power of attorney is a legal document that authorises an individual (the attorney) to act on behalf of another person (the donor) in relation to matters delegated within the document. A power of attorney may relate to one’s personal affairs and cover all decisions related to finance, property, and health care. However, certain powers of attorney can also cover business matters.
In this article, I’ll outline the differences between a general power of attorney and a lasting power of attorney. By the end, you’ll have an understanding of which power of attorney is right for you.
There are two main types of powers of attorney: general powers of attorney (sometimes referred to as ordinary powers of attorney) and lasting powers of attorney.
If you ever find yourself in need of delegating any of your powers of decision-making abilities, it is helpful to examine the differences between these two types. This will ensure that you know which document will be appropriate for you.
Does “attorney” refer to a lawyer?
A common misconception that many clients have is that the term “attorney” must mean “lawyer”. This most likely comes from the language they’ve seen in American TV shows.
However, this is not the case. When dealing with matters around powers of attorney, the word “attorney” simply means the person who will be acting on behalf of another person.
While an attorney may be a solicitor, the role is not confined to one profession. Donors will often choose their spouse, their children, other family members or indeed close friends to act as their attorney.
In English law, a donor may choose to appoint anyone they like as their attorney. This is as long as the prospective attorney is older than 18 years, has mental capacity and are not bankrupt.
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A general power of attorney is a legal document that gives the attorney the authority to act on behalf of the donor. They are governed by The Powers of Attorney Act 1971.
It is a fairly malleable document that delegates decision-making powers. This is only in certain situations or in relation to specific assets or transaction. They can also be broad enough to touch upon all matters related to finance and property.
This type of power of attorney is common in short-term or specific purposes. Examples include when the donor is traveling abroad or is unable to manage their financial affairs due to temporary illness or perhaps physical incapacity.
A general power of attorney is valid for 12 months however the document itself can provide for a shorter time period and can be revoked at any time by the donor. A general power of attorney will also only be valid for as long as the donor has mental capacity and will automatically be revoked if the donor loses mental capacity.
What is a lasting power of attorney?
A lasting power of attorney (“LPA”) is a legal document that allows the attorney to make decisions on behalf of the donor. LPAs are governed by the Mental Capacity Act 2005.
There are two types of LPAs:
health and welfare, and;
property and financial affairs.
Making an LPA includes a number of requirements and formalities. For instance, signing an LPA requires a specific order and format. Moreover, you must register an LPA with a government body in England and Wales called the Office of the Public Guardian (“OPG”).
An LPA is designed to provide long-term protection for the donor in the event that they become mentally incapacitated. This means that an LPA remains valid even if the donor is no longer able to make decisions on their own. A donor can only create an LPA when they have mental capacity, and they must register it with the OPG before it comes into effect.
If you’re unsure about which LPA you might need, consult our expert team by calling 0203 007 5500.
Health and welfare lasting powers of attorney.
The health and welfare LPA gives the attorney authority to make healthcare decisions on behalf of the donor. This includes end of life decisions such as the refusal of treatment or non-resuscitation.
This LPA is only able to take effect upon the donor losing mental capacity. Due to this, even after registration with OPG, an attorney may not step in to assist with making decisions for the donor if the donor still has mental capacity to make their own decisions.
Property and welfare powers of attorney.
The property and financial affairs LPA focuses on all matters relating to property and finances. The attorney is given the authority to manage the donor’s bank accounts, their property and any investments the donor may have. The attorneys can also make investments on the donor’s behalf and even sell the donor’s property (but only if that is in the donor’s best interests).
The donor can choose when this type of LPA takes effect. This is either upon registration with the OPG, or only when the donor loses mental capacity. This is a personal preference for each donor but there are many arguments as to why the donor may require help before they lose mental capacity entirely.
What are the differences between general powers of attorney and lasting powers of attorney?
There are a number of notable differences between general powers of attorney and LPAs. This means that one may be more appropriate for a specific situation than the other. Such differences include:
1. The duration of the document
One of the most important differences between a general power of attorney and an LPA is the duration of the document. A general power of attorney is valid for up to 12 months, subject to the donor retaining mental capacity within that time and can be revoked at any time by the donor.
Conversely, an LPA remains valid even if the donor becomes mentally incapacitated. A donor can cancel an LPA as long as they have mental capacity. To cancel the LPA registration, the donor must sign a deed of revocation which they then must submit to the OPG.
2. When the documents become legally effective
A general power of attorney becomes legally effective upon valid signing and witnessing. By contrast, the donor must register an LPA with the OPG before it becomes legally effective.
Due to the volume of LPAs that the OPG receive daily (between 3,000 and 4,000 by their last estimate), they take several weeks to register. The registration includes several stages, including the initial review, the more detailed checking of the document and an additional 4 week cooling off period in which any of the donor or their attorneys may object to the registration of the LPA. This is important to protect the donor’s interests and help to safeguard against abuse of power by the attorneys.
3. Formalities in making the document
The donor must sign the general power of attorney as a deed, which means they need two witnesses to their signature. LPAs must also be signed in the prescribed order, each signature must be witnessed, and the donor must provide a certificate provider.
A certificate provider is a person who can verify that the donor does have mental capacity. This means that the donor understands what an LPA does and are not under the influence of anyone else when signing it.
4. Scope of authority granted in the document
A general power of attorney is generally only used in relation to property and financial matters. It can either cover all such matters or be more limited in scope, such as the management of one of the donor’s bank accounts for example.
LPAs are usually much broader in scope and can encompass decisions about property and financial matters and also health and welfare decisions.
5. The flexibility of the documents
As alluded to above, general powers of attorney are very flexible and can be used to cover any breadth of situation with which the donor may require assistance, from the management of one bank account or the sale of one property, to the delegation of all financial matters for a short period of time.
By contrast, LPAs are far more rigid and generally cover all property and financial or health and welfare matters. The only way in which an LPA can incorporate bespoke wishes of the donor is through the use of instructions and preferences. Instructions must be legally enforceable and will be reviewed by the OPG legal team upon registration. Preferences do not need to be legally enforceable.
How can we help?
Both general powers of attorney and LPAs serve an important purpose in allowing an individual to appoint someone to act on their behalf. This article only scratches the surface of the intricacies of these documents and the legal issues that can surround making a power of attorney of any kind.
It important to consider your needs and circumstances before deciding which type of power of attorney is right for you. Consulting with a legal professional can help you navigate this complex area of law and ensure that your wishes are properly documented and carried out and all proper procedures are followed.
If you would like to know more about powers of attorney, get in touch with our specialist Private Client team by calling 0203 007 5500 or sending an email to firstname.lastname@example.org