The purpose of Lasting Powers of Attorney (LPAs) is to appoint an attorney or attorneys who will act on your behalf, should you lack the capacity to do so.

Should you wish, financial LPAs can also be used whilst you still retain capacity. LPAs are, therefore, particularly useful for the older generation, but should be something that everyone considers putting in place when making their wills, as a lack of capacity during earlier life can sometimes occur unexpectedly.

LPAs can be made in respect of finances, and also health and welfare – here we focus on financial LPAs.

Although LPAs can be very useful, there are potential problems arising from their operation. Many of these can be avoided with the correct advice in preparing your LPAs. Other difficulties are less easy to predict, and may require legal advice at the time. We outline below some common difficulties that we see attorneys experiencing in operating LPAs, together with some suggested solutions.

The first hurdle: banks and compliance

Banks and similar providers will be the organisations with whom you are likely to have the most interaction whilst operating an LPA. Operation of bank accounts is also often the most urgent matter to be dealt with by an attorney when a person loses capacity, to allow day-to-day expenses to be managed.

Each bank will need to see the original or a certified copy of the LPA, before allowing an attorney to operate the account or accounts. They are also likely to require identity documentation, so there is generally quite a lot of set-up administration at the outset.

There is guidance in place as to how banks and other financial services providers should engage with attorneys in order to operate LPAs (or their predecessors, Enduring Powers of Attorney, or EPAs) the most recent of which was published by the Tax Incentivised Savings Association (TISA) in August 2018. Where these guidelines are known and followed, you should find that you are able to operate LPAs fairly smoothly.

However, attorneys’ experiences can vary. For example, it is often the case that frontline telephone advisers may not have adequate training to deal with queries about operating a person's bank account on their behalf, or they may not have the experience to deal with what can be fairly complex situations.

There is not a great deal that can be done in advance in order to avoid this situation, although the position can be helped by ensuring that the attorneys have appropriate ID to hand when requested, and also that the terms of the LPA are clear, i.e. the provisions around how bank accounts are to be operated are not too complex.

Many people you deal with at a bank will not be legally qualified, and may need to seek input from their in-house lawyers about certain provisions or requests. Where there is a lack of clarity or some sort of impasse, we are able to intervene on the client's behalf, where appropriate, in order to speed up the process.

Investment portfolios

Many clients have investment portfolios which they do not actively manage themselves. These are often held by a broker, with investments either in individual shareholdings, or funds which hold a broad range of shares, in order to spread risk. This is a very normal way of investing, particularly for older clients looking for a way to provide additional income in retirement.

However, in practice, an attorney cannot instruct an investment manager to hold investments in this way, unless the LPA explicitly allows for it. In the absence of such explicit permission, the attorney will need to proactively take decisions on which investments are bought and sold and at what time, which may not be a role that the attorney is qualified or able to fulfil.

The good news is that this position can easily be avoided by inserting appropriate wording in the LPA. If this wording is included, then an investment manager will be able to continue to accept instructions from an attorney, or to set up a new portfolio for the incapacitated person on an attorney’s instructions. Even if you do not hold such a portfolio at the time of making your LPA, we would suggest that this wording is always included to safeguard the position for the future.

Joint appointments

There are two ways in which attorneys might be appointed (where there are two or more attorneys). These are ‘jointly’, i.e. all decisions must be taken together and agreed by all, or ‘jointly and severally’, i.e. the attorneys can act together or separately. We would generally advise that joint and several appointments are made, as this provides maximum flexibility to the attorneys.

However, there are reasons why people might wish to make joint appointments, for example they would not be happy for a single attorney to take certain types of decisions alone. Whilst this is a valid choice, we have come across situations where clients are not initially aware of the practical limitations of joint appointments. In particular, were a jointly appointed attorney to die or become incapacitated themselves, the LPA would not operate. It would not be the case (as some believe) that the remaining attorney or attorneys would be able to continue to act. Instead, the LPA would simply be ineffective, unless there were replacement attorneys appointed.

Should a joint appointment be requested, we would be pleased to discuss this with you. We can look at how best to protect your position in the longer term, for example by appointment of suitable replacement attorneys. It is also possible to appoint attorneys to act jointly in respect of certain decisions and joint and severally in respect of others, but careful thought should be made to such an appointment, to ensure that it is workable in practice.

Trusts and trustees

Trusts are a feature of English law, and their use is more common than many realise. Trust assets can, in some cases, be relatively modest. Common situations where trusts might arise would be from a person's will, particularly to provide for minor beneficiaries – in relation to charities – or in respect of life assurance policies.

Many people believe that because the role of the trustee is often a financial one, then an attorney will simply ‘step into the shoes’ of a trustee who has made an LPA. This is unfortunately not the case. The attorney does not take on the role of trustee where the incapacitated person was the trustee themselves.

In many situations this will not cause problems, as there are provisions in trust law to allow for an incapacitated trustee to be retired. However, in some circumstance (e.g. in some cases where the incapacitated person is also a beneficiary of the trust), then an application to court will be necessary. This can be very costly.

If you are a trustee and have concerns about capacity matters, we would suggest that you take advice on what would happen if you or another of the trustees were to become incapacitated, and what provision might sensibly be made for that. There will still be some instances where an application to court is unavoidable, but it is sensible to think about possible scenarios in advance.

This article summarises the types of queries that we regularly receive in relation to operating LPAs, however it is not exhaustive. The specific details will always be personal to you, and our experienced team are on hand to give tailored advice on these matters, or assist with any other queries you may have about operating an LPA in practice.