A lasting power of attorney (LPA) is a legal document through which you authorise a chosen person (an attorney) to make certain decisions on your behalf.
An attorney can make decisions in relation to your finances, for which an LPA for property and affairs will be created, or in relation to your personal life, where an LPA for personal welfare will be created. An LPA ensures continuity in the management of your life and your finances, should you become unwell or lose the capacity to make decisions.
A common mistake is the belief that an LPA is not necessary, an assumption is made that family members can simply step in, when necessary, to make decisions. But this is not the case; family members do not have the automatic right to make decisions on your behalf.
LPAs for business
If you are a company director, partner or sole trader, then you have most likely invested a lot of time, money and effort into your business and need to protect your interests. You may already be aware of ‘Key Person’ insurance, but have you considered protecting your interests if, for whatever reason, you cannot make certain decisions? Business owners and company directors are extremely busy people. If you were unable to make decisions due to capacity issues you should have a plan in place to ensure that the day to day running of your business in your absence.
People tend to think of lack of capacity as a gradual process linked with old age; however, this is not the case. You may not be able to make certain decisions if you are out of the country, have had a serious accident, or have become unwell, mentally or physically, which incapacitates you.
Don’t assume that a family member or a business colleague will gain the authority to make these decisions on your behalf – this assumption could leave your business exposed to risk.
To protect your interests, and those of your business, you should consider making a business LPA.
A business LPA will be appropriate in most circumstances, but it’s important to first consider the type of business you own.
If you are a sole trader appointing an attorney under a business LPA will be an effective way for you to make provision for the continuity of your business, in the event that you are incapacitated.
If you are a partner in a partnership that has several partners, check the terms of the partnership agreement. Some partnership agreements may already include provision for what would happen should one of the partners become incapacitated. If such a provision exists, it may already adequately provide for the continuity of the business.
However, if you’re in doubt about the provision made in the partnership agreement, or you feel that an LPA may be required, you should seek advice on the wording of the LPA, to ensure that it doesn’t conflict with the provisions already made in the partnership agreement.
Directors of companies: articles of association
If you’re a director of a company, check the company’s articles of association. Very often, articles of association will provide for the termination of a director’s appointment in the event that the director loses capacity. This is often done to protect the company’s interests but it could leave no one running the company. In such circumstances, a business LPA would be appropriate.
Can you make an LPA covering your personal and business affairs?
You are able to appoint more than one attorney to act in conjunction with each other. For example, a business associate can be appointed to work alongside a family member. The attorneys could be appointed to act jointly in some aspects and separately in others. Fortunately, it is also possible to make more than one LPA. You could consider making one for your personal affairs and a separate one for your business affairs. Often, people like to keep their business affairs separate from their personal affairs, so this option tends to appeal.
If you’re unable to make business decisions in the future and have not made a business LPA, it may become necessary to make an application to the Court of Protection for the appointment of a deputy to act on your behalf. The process can be expensive, and there’s no guarantee that the Court of Protection will choose someone you would have chosen. It could also take more than six months before a deputy is appointed, during which time your business may be vulnerable and at risk.
The Financial LPA can be used as soon as it is registered with the Office of the Public Guardian and can also be revoked if you retire or sell your business – as long as you still have the capacity to revoke it. The LPA can also be structured in a way that it can only be used if you lose mental capacity (instead of physical capacity).
Mark Goodson – BTMK