There were some interesting figures obtained by wealth managers Quilter under a Freedom of Information request to the Office of the Public Guardian (OPG) in relation to Lasting Powers of Attorney (LPA), not least that roughly 20,000 applications are rejected each year due to mistakes and it takes an average 91.5 working days for them to be registered.
However, it’s not entirely negative news. The headline figures – just over 770,000 applications for LPA registration in 2022 – are good. They show that people are understanding the importance of LPAs – a crucial part of any estate planning. They are more important than a will in a way; wills deal with your assets for the benefit of other people, while financial LPAs allow your assets to be used for your own benefit when you no longer have the capacity to manage them for yourself.
The rejection of LPAs for registration due to procedural errors is not surprising; the forms are complicated, there is a prescribed order in which they must be signed and there are multiple parties involved: donor, attorneys, certificate provider and witnesses.
One reason cited to Quilter was the inclusion of unreasonable LPA requests: internal cohesion, if you like. We often have clients who are happy that ‘minor’ decisions are made by attorneys jointly or individually, but that a ‘major’ decision, such as selling the family home, has to be done by all attorneys jointly. The wording has to be very accurate to avoid any internal conflict and more importantly be workable for the attorneys.
The other major factor behind errors, and for which there is probably not a clear way for the OPG to differentiate, must be that there are several ways in which to make an LPA: doing it at home using the OPG’s online service, using a service like Which?’s (there may be other providers!), whereby for a fee a ‘specialist’ checks the LPA before registration, and finally what I term ‘the gold-plated service’ – having them drafted by a solicitor.
There have been stories in the press about abuse of powers by attorneys and donors being forced to make them, which can (A) put people off having them at all or (B) push people to take advice on them. Clients who can pay and want to take advice come to us to discuss the scope of the powers and the duties of the attorneys, and to seek guidance on suitable attorneys (particularly if there is a tricky family situation) and the inclusion of clauses to make them as practical as possible. As solicitors, we see what happens on many other client matters and provide advice to clients based on that wider experience. With many clients, as part of our offering, we can act as certificate provider and oversee the signing to minimise the risk of falling at a procedural hurdle.
An increasing aspect of our work on LPAs is a cross-border element: powers for non-UK nationals who might have assets and property here and want to ensure it can be managed under local powers in the event of incapacity. Likewise we cater for English & Welsh nationals who have property overseas; in many cases that involves notarisation of completed LPAs to have them recognised by an overseas jurisdiction as a valid UK appointment.
Another crucial aspect of LPAs is to avoid paralysis of a business, particularly where there is a sole shareholder-director company. Attorneys cannot exercise director functions – the company articles will often provide for loss of office on incapacity – but they do allow an attorney to exercise shareholder rights, and quite often this might be the appointment of directors.
The term ‘business LPAs’ is marketed, but for business owners it is merely making two financial LPAs – one for ‘domestic’ finances and one for their business interests. They might want separate attorneys covering the different aspects. It is possible for someone to make two LPAs, and it is the job of the solicitor drafting to ensure the scope as between the two is clear and nothing falls through the cracks.
Between my team and my corporate colleagues, there are plenty of examples we can give of a loss of capacity causing a major issue for a transaction. In theory, someone can apply for a deputyship, where there is no LPA in place, on urgent basis to the Court of Protection. However, the court has faced huge backlogs, and I have to draw my corporate colleagues’ attention to the fact that it is not purely a business court. Much of its workload, and automatically its most urgent cases, are making decisions of life and death importance for those who do not have the capacity to do so for themselves, the cases we see on the news occasionally.
Ultimately, if there are any complicating factors in someone’s affairs, proper advice is needed, and that goes for LPAs as much as Wills.