Managing financial and personal affairs can become challenging due to age, illness, or unforeseen circumstances. In the UK, different types of power of attorney (POA) provide legal frameworks for someone to act on your behalf when you cannot make decisions yourself. The three main types are Lasting Power of Attorney (LPA), Enduring Power of Attorney (EPA), and General Power of Attorney (GPA). While each serves a similar purpose—appointing someone to act on your behalf—they differ significantly in terms of scope, duration, and legal standing. I will explore these differences to help you understand which type may be most appropriate for your needs.

 

 

Lasting Power of Attorney (LPA)

 

Lasting Power of Attorney (LPA) is a legal document that allows you to appoint one or more individuals (known as attorneys) to make decisions on your behalf should you lose the mental capacity to do so. LPAs were introduced in 2007 under the Mental Capacity Act 2005, replacing the previous system of Enduring Power of Attorney (EPA).

Types of LPAs: There are two types of LPAs:

• LPA for Property and Financial Affairs: This type allows your attorney to manage your financial matters, such as paying bills, managing bank accounts, selling property and handling investments. It can be used while you still have mental capacity, with your consent, or come into effect only when you lose capacity.
• LPA for Health and Welfare: This type allows your attorney to make decisions about your healthcare, medical treatment, living arrangements and daily care. However, it can only be used when you no longer have the mental capacity to make those decisions yourself.

Key Features of LPAs:

• Registration Requirement: An LPA must be registered with the Office of the Public Guardian (OPG) before it can be used. The registration process can take up to 20 weeks, so it’s advisable to complete this step well in advance of when it might be needed.
• Flexibility and Control: LPAs offer flexibility and can be tailored to include specific instructions or preferences regarding how your attorneys should act.
• Revocation: You can revoke an LPA at any time, provided you have the mental capacity to do so.
• Wide Applicability: LPAs cover a broad range of decisions related to both personal welfare and financial matters, making them suitable for long-term planning.

 

Enduring Power of Attorney (EPA)

 

Enduring Power of Attorney (EPA) was the predecessor to the LPA for Property and Financial Affairs and is now a superseded legal instrument. However, if an EPA was created before 1 October 2007, it is still valid and can be used.

Key Features of EPAs:

• Financial Matters Only: EPAs only cover decisions related to property and financial affairs, not health and welfare.
• Activation Upon Incapacity: Unlike an LPA for Property and Financial Affairs, which can be used immediately upon registration, an EPA can only be used when the person who granted it (the donor) becomes mentally incapacitated.
• Registration Upon Incapacity: EPAs do not need to be registered with the OPG unless the donor starts to lose mental capacity. At that point, the attorney must register the EPA with the OPG.
• No New EPAs Allowed: Since 1 October 2007, it is no longer possible to create a new EPA. Individuals who wish to make provisions for their financial affairs must now use an LPA for Property and Financial Affairs.

Differences from LPAs:

• EPAs do not cover health and welfare decisions; they are limited to financial and property matters.
• EPAs do not require immediate registration with the OPG unless the donor is losing mental capacity, whereas LPAs must be registered before use.

 

General Power of Attorney (GPA)

 

General Power of Attorney (GPA) is a simpler, more limited type of POA that allows an individual (the donor) to appoint someone (the attorney) to make decisions on their behalf. GPAs are typically used for specific, short-term purposes and are not suitable for situations involving mental incapacity.

Key Features of GPAs:

• Limited Scope and Duration: GPAs are usually used for specific situations where the donor needs someone to act on their behalf temporarily, such as managing their affairs while they are abroad or selling a property.
• Mental Capacity Requirement: A GPA is only valid while the donor has mental capacity. If the donor loses mental capacity, the GPA automatically becomes invalid.
• No Registration Needed: Unlike LPAs and EPAs, GPAs do not need to be registered with the OPG. They can be created quickly and easily, usually without any formal process or significant cost.
• Revocation: The donor can revoke a GPA at any time, provided they have the mental capacity to do so.

Differences from LPAs and EPAs:

• GPAs are not suitable for long-term planning as they are automatically revoked if the donor loses mental capacity.
• GPAs do not cover health and welfare matters and are typically limited to specific financial transactions or decisions.

 

Which Power of Attorney is Right for You?

Choosing the right type of power of attorney depends on your specific needs and circumstances:

• For Long-Term Planning: An LPA is the most comprehensive option, allowing you to cover both financial and health decisions. If you want to ensure continuity of care and decision-making if you lose mental capacity, creating an LPA is essential.
• For Financial Matters Only (Pre-2007): If you created an EPA before October 2007, it remains valid, and you may not need to create a new LPA for Property and Financial Affairs. However, for health and welfare decisions, you will need an LPA.
• For Short-Term or Specific Needs: A GPA is useful for temporary situations where you need someone to act on your behalf while retaining full control. However, it is not suitable for long-term use or situations where you might lose mental capacity.

 

Conclusion

Understanding the differences between Lasting Power of Attorney, Enduring Power of Attorney, and General Power of Attorney is crucial for effective planning and protecting your interests. LPAs offer a comprehensive, long-term solution for both financial and health-related decisions, while EPAs (if already created) and GPAs serve more specific needs. Consulting with a professional can help you choose the most appropriate option and ensure that all necessary documents are in place to safeguard your future.  You know it makes sense.*

 

 

*RISK WARNING

The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this blog is for guidance only and does not constitute legal or financial advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. The Financial Conduct Authority does not regulate tax planning, estate planning, powers of attorney or trusts.  This blog is based on my own observations and opinions.