Power of Attorney or Court of Protection – which is best?
In an ideal world, we would all prefer to manage our own affairs. There may come a time, though, when this is not possible.
Reasons may range from being out of the country to developing advanced Alzheimer’s, but the effect is much the same. At some point, someone else may need to make financial decisions on your behalf.
The two main methods of arranging this are setting up a Power of Attorney or going through the Court of Protection to arrange a Deputyship. So, which is best?
What is a Lasting Power of Attorney (“LPA”)?
An LPA must be set up by the person affected, at a time when they are deemed to have sufficient mental capacity to make the decision. It can be made at any time. An Attorney is appointed to make decisions in relation to either your Property of Financial Affairs and or Health and Welfare. An Attorney should be someone you know and can trust, since they could be making life-changing decisions on your behalf.
A typical choice of Attorney might be a partner, a family member or a close friend. Whilst there is no restriction on whom you can choose, the person must be aged eighteen or over and have agreed to act in this capacity. Other options include a business partner, or a professional, such as a solicitor.
An Attorney in relation to your property and finances can be responsible for paying bills, managing income such as benefits and possibly taking decisions about selling property or shares you own in order to meet your needs. You may also have an Attorney for your health and welfare who decides on your medical care or living arrangements. You can also state whether your Attorney can make decisions in relation to life sustaining treatment. An Attorney can just be one person or power can be split between more than one person, who can act jointly or jointly and severally.
You can also set up an Ordinary Power of Attorney when the support is only needed for a limited time. This could be if you are going into hospital for treatment that may take some time, or if you are going to be out of the country for an extended period, and you need someone to manage your affairs in the meantime.
What is the Court of Protection?
If it is decided that you have lost mental capacity without having Lasting Power of Attorney in place, you will need to have a Deputy appointed by the Court of Protection. A Deputy can be a partner, family member or close friend who is willing to take on the role of Deputy (Lay Deputy). It can also be a professional, or even a local authority particularly if there are large sums of money involved or family disagreement.
A Deputy has broadly the same responsibilities as an Attorney but is subject to far closer scrutiny.
A Deputy will be supervised and supported by the Office of the Public Guardian. They may receive regular visits from a representative of the Office of the Public Guardian and have to provide a report on an annual basis detailing all income and expenditure for the person they are Deputy for. The court has the power to cancel their Deputyship if it is felt that they are not acting in a person’s best interests.
As with Lasting Power of Attorney, there are two types of Deputy — Property & Financial Affairs and Health & Welfare — and again this can be one person or more than one. Only a Professional Deputy can be paid for their time but a Lay Deputy can claim reasonable expenses.
Which is best?
In most circumstances, an LPA is an easier and cheaper option. Although costs can vary a little, setting up one LPA typically is around £350, while setting up a second at the same time is relatively much cheaper. There are usually no other expenses involved.
The costs of going to the Court of Protection to appoint a Deputy, on the other hand, are considerably higher. There is an initial application fee of £385, unless the person needing a Deputy is eligible for a reduction or exemption.
It doesn’t end there, though. The Office of the Public Guardian usually requires an annual payment of £320 for ongoing supervision of a Deputy. A Deputy also needs to set up a security bond, which can vary in cost depending on the value of the assets.
So why would anyone choose the Court of Protection over a Lasting Power of Attorney?
Most often it is not planned, merely “not getting around” to setting up an LPA before it is required. Alternatively, if someone has suffered an injury at birth or as a child and then awarded compensation, they may also have no option but to appoint a Deputy.
An LPA is not only cheaper and easier to set up, it also gives you a full say over who is going to manage your affairs and avoid any frustration and distress for those around you.
Osborne Morris & Morgan can help
We would recommend that everyone should consider setting up a Lasting Power of Attorney as soon as possible, since none of us can predict what is going to happen to us.
Alternatively, if you have a family member that no longer has capacity to manage their own affairs and does not have an LPA, we are happy to give advice on the Court of Protection and possible application. If you want to discuss your options further, you are very welcome to get in touch with us.