TDQ – Powers of Attorney
1 November 2018
The incidence of Powers of Attorney being tested in CII exams AF1 and J02 are high, so make sure you are prepared, says Catriona Standingford of Brand Financial Training
Powers of Attorney is tested in CII AF1 (personal tax and trust planning) and CII J02 (Trusts). Within the syllabus for J02 learning outcome 4 states ‘explain substituted decision making, to include all types of Power of Attorney and other options’ and within the syllabus for AF1 learning outcome 7 states ‘ implications of substituted decision making to include types of Power of Attorney and other support whilst living……’. This means that this subject will be tested at most, if not all, of these particular exam sittings.
Powers of Attorney
As we get older, more thought is given to matters that when we are younger seem a million miles away; things like long term illness, serious illness, death and taxes. Issues such as making sure Wills are up to date and funding for inheritance tax and long term care are suddenly the topics of conversation clients are having with similarly aged friends but in particular are talks clients should be having with their families. Part of this conversation should be ensuring that other people can act on their behalf should the need ever arise.
Powers of attorney can only be set up whilst a person still has the ability to make decisions for themselves; in other words whilst they still have mental capacity.
A power of attorney is someone appointed by an individual to look after their affairs should that person be unable to do so, although sometimes one is put in place to do something because that person is out of the country or simply because they would prefer someone else to do it!
Under the old pre-2007 regime, we had an Enduring Power of Attorney. It was a fairly simple process to set one up and lots of people at the time were encouraged to ‘get in quick’ before they were no longer available in October of that year. (Although they were simpler they didn’t have any of the protection that was later put in place with LPAs).
If the person subsequently lost capacity, then the attorney had to register the EPA with the Office of the Public Guardian and once registered they could deal with that person’s affairs.
It’s not possible to make any changes to an existing EPA, or make a new one, but they are of course still valid and can be registered should the person become mentally incapacitated.
Following the Mental Capacity Act 2005, which came into effect on the 1st October 2007, the Lasting Power of Attorney was introduced.
A different process exists with the LPA in that they have to be registered with the Office of the Public Guardian straight away and there must also be a certificate from ‘prescribed people’ who can confirm that the person understands the LPA and there has been no undue pressure put on them. In other words this acts as a safety net for vulnerable people. It should be noted that LPAs can take up to 8-10 weeks to be registered.
With an LPA there are two types of power – the first one is like the old EPA, a property and financial affairs LPA which is self-explanatory; the attorney looks after the person’s finances which can include making decisions about their money and property, managing bank accounts, paying bills, collecting a pension and if it comes to it, selling their home. Once registered the LPA can be used straight away or it can be held until it is needed.
The second one is a health and welfare LPA which allows the attorney to make decisions on behalf of that person regarding their welfare, including daily routines, where they live and allowing or refusing medical treatment. A personal welfare LPA can only be used once it’s registered and the person has become incapable of making those decisions themselves.
Both LPAs can be set up in the same way but they do require two applications.
According to the Alzheimer’s Society, there are around 850,000 people in the UK suffering with dementia and because people are living longer numbers are expected to increase to one million by 2025 and over two million by 2051. Furthermore dementia doesn’t just affect older people; over 40,000 people under 65 are also living with this disease.
Planning ahead to get both types of LPA in place offers peace of mind that a trusted person will be in charge of affairs should mental capacity become an issue.
Remember it’s not possible to set up a Power of Attorney for someone who has already lost mental capacity; where this has happened families have to apply to the Court of Protection to be appointed as deputies. This is a much more lengthy and expensive process; further reasons to think ahead and get LPAs registered in good time.
Further information on exam questions can be found at: https://brandft.co.uk
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