What is a power of attorney?

A power of attorney is where one party (the donor) confers upon another party (the attorney) power to act on the donor’s behalf where, for various reasons, the donor is unable to do so directly.

In order to successfully confer a power of attorney, donors must ensure that certain prescribed legal formalities are met. The most important of these is that the power of attorney is executed as a deed. That means a document which is drawn up and can be signed by the donor so that it acts as confirmation of the authority they have granted to the attorney, as named in the deed, to act on their behalf.

There are two distinct types of powers of attorney. Ordinary powers of attorney and the Lasting Power of Attorney.

These are the most common form of powers of attorney, and the ones with the broadest number of possible applications. Typically however they will be conferred upon the attorney for one specific purpose or in relation to a specific aspect of the donor’s affairs. Unless the power of attorney is stated to be irrevocable, it remains in effect until the donor or attorney either dies or ceases to have mental capacity. Should performance become impossible or illegal, then the power of attorney will automatically be terminated.

Donors can also expressly revoke the power of attorney without requiring the attorney’s acceptance or consent, though it is best in such circumstances that revocation takes place by way of a deed (a signed legal document). The same holds true should the attorney decide to disclaim the authority conferred upon them, even where the power is stated to be irrevocable. If multiple attorneys have been appointed, and one chooses to disclaim their authority, the remaining attorneys may continue to exercise their own authority, unless the deed conferring the power of attorney contains provisions to the contrary.

For example where the donor requires a document to be signed but is unable to do so, they can confer the authority to sign the document, or any others which require a signature, upon the attorney.

Powers of attorney can also be used as stopgap measures to allow the exercise of rights otherwise reliant upon documentation being completed. This is common with the transfer of shares from one party to another. The power of attorney being used to ensure the new shareholder can exercise their rights as a member of the company before their holding of the shares is registered with Companies House.

In this manner any unforeseen developments can be dealt with quickly and do not act as a hindrance.

Under an ordinary power of attorney, although attorneys cannot delegate the authority invested in them by the donor, they can seek to appoint a substitute, the authority to so being included in the deed. Donors can also seek to limit the attorney’s power as to whom they can appoint as substitutes.

Lasting powers of attorney came into effect on 1 October 2007, under the auspices of the Mental Capacity Act 2005. They replaced Enduring powers of attorney, though any such powers of attorney conferred by donors before 1 October 2007 will continue to have effect.

Unlike an ordinary power of attorney, lasting powers of attorney are not intended to be revocable and are to be used where a donor has lost, or is at risk of losing capacity.

Lasting powers of attorney are generally divided into two types:

  • those granted in relation to managing a person’s financial affairs
  • those conferred for decisions about a person’s health and care

As with ordinary powers of attorney, the powers must be conferred by means of a deed (a signed legal document), which is signed by the donor and details the full extent and scope of the attorney’s powers and ability to act on the donor’s behalf. This takes the form of a prescribed form from the Office of Public Guardians which lasting powers of attorney need to be registered with before attorneys can exercise their authority.

The deed must also specify whom the donor wishes to appoint as attorney. This can include both primary attorneys, and secondary attorneys who will be appointed if the primary attorney no longer has capacity to perform the role.

If a donor wishes to appoint both types of lasting attorney, they may decide to use the same attorney in relation to both financial affairs as well as health and medical care. Alternatively they may appoint different attorneys. With the latter option however, it may be the case that different attorneys will need to work together in relation to any issues which arise.

Lasting Power of Attorney for Financial Affairs

With this type of lasting power of attorney, the attorney will have a wide ranging power to act on the donor’s behalf, including paying bills, selling property or investments, or simply managing the donor’s bank account.

Anyone who is over 18 can choose to confer this type of lasting power of attorney. Similarly anyone who is over 18 and possesses mental capacity to act as attorney, can be appointed to do so. One restriction in place however is that the attorney must not be bankrupt or the subject of a debt relief order when they agree to act as attorney.

Multiple attorneys can be appointed, though the donor will need to consider how such an arrangement is to work in practice, and whether the attorneys will be act individually on a joint and several basis.

Authority to deal with financial affairs can also be used while the donor still has the mental capacity to act themselves. If a donor wishes that the power of attorney only comes into effect subject to their loss of mental capacity, this can be specified in the deed.

Lasting Power of Attorney for Health and Care

The second type of lasting power of attorney can, in contrast, only be used where the donor has lost the mental capacity to make decisions on their own behalf.

The attorney can make decisions about the type of medical treatment the donor can receive, as well as their diet, where they live, and how they spend their time, unless it is specified otherwise.

This decision making capacity does not generally include decisions over whether a donor can be given life sustaining treatment, and decisions in this regard will remain within the remit of medical professionals, unless express provision is made in the deed under which the power of attorney is granted. Donors will be able to express this choice in section 5 of the form used to record and register the lasting power of attorney.

Who can you appoint as a power of attorney?

There is little in the way of statutory restrictions. As long as the intended attorney is over 18 and has the mental capacity to be able to exercise the powers conferred upon them by the donor, their appointment can proceed.

Should you have any questions or queries regarding powers of attorney, or if you are looking to prepare a power of attorney, please do not hesitate to contact us on 02476 231000.

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