Feb 12, 2021

Lasting Power of Attorney - what is it? Why does it matter?

Lasting Power of Attorney

Julie was kneeling at the edge of a country road, bent over her husband, David. Moments before, he had been strolling towards her, when he was struck by a car. As he lay motionless and Julie knelt, waiting for the ambulance, she sensed that life for her was set for a dramatic change. In this blog, we look at the difficulties that arise when Power of Attorney isn't in place.

Looking after day-to-day finances

As Julie feared, David’s injuries were terrible. He went into a coma, from which he would never recover. Of course, there was much for Julie to deal with. Aside from the shock of the accident and the trial of seeing that her husband was well-cared for, Julie was forced to deal with numerous everyday financial matters that come with a large family.
They had each written a will and shared the two properties. With separate bank accounts, most of the bills were paid from David’s. But, of course, the wills were irrelevant. Because though completely unconscious, David was still alive. Julie had no way of accessing his bank account. How was she to pay all those bills?

The Court of Protection - a necessary evil

A solicitor advised Julie that the only route open to her was through the Court of Protection, sometimes known as the Public Guardianship Office. How does this work? Perversely, although it was Julie who needed support, The Court of Protection was there to protect David from her - to actually make it difficult for her to gain access to vital funds. The only way through was for Julie to go through a long, complex procedure, filling in numerous forms detailing every aspect of their lives. Effectively, Julie had to become David’s Receiver.

Lasting Power of Attorney

Could this cruel emotional anguish have been avoided? The answer is a resounding ‘yes’. How? By the simple, yet little-used process known as Lasting Power of Attorney (LPA). It’s nothing more than a simple legal document whereby, in the event of you becoming incapacitated, someone of your choosing is in place to make decisions on your behalf. This could be for your finances or for your personal affairs.

David died three years after the accident. So then, of course, the Court of Protection was no longer active.

LPAs for business

An LPA is not only for personal assets. It can also apply to business owners too – as was the case with David. He was sole director of a business, which as then forced into administration and liquidation. Three people lost their jobs. With an LPA in place, all this would have been avoided - the business would have been able to carry on.

Shareholders, partners and sole traders are some of the most common business owners who might benefit from appointing an LPA. Let’s say you’re in David’s position - a business owner who’s either killed or incapacitated. Is there someone in place who could take over the running of the business and its finances? If not, and your family depend on income from the business, well - just think about how severely their finances might be affected.

Months of delay

Not appointing an LPA could be devastating for your business. An application would have to be made to the Court of Protection to appoint a deputy. This process could take up to nine months and comes with a considerable financial burden. In the meantime, the business could well suffer, with no one in a position to oversee its finances and day-to-day operations. Without the correct legal authority, family members or employees might not be in a position to run the business.

When you appoint your LPA, make sure you appoint someone you can trust - someone you’re confident will run the business in a way that you would wish. You could decide to appoint two attorneys – one to deal with business (perhaps an accountant or an employee) and the other for personal finances (maybe a family member).

Your chosen attorney takes charge

Once in position, the business LPA will allow your chosen attorney to manage the business as and when needed. If you are still alive but temporarily incapacitated, your right to run the business once you feel able, remains unaffected. This type of temporary LPA can be useful if you are a business owner who often has to travel overseas.

Think of a business LPA as the cornerstone of an effective business continuity plan. Regardless of health, all business owners should have an LPA in place to protect their business and family finances.

Here to help

If, for whatever reason, you become unable to run your business, your family will have enough on their plate. Why burden them with the extra worry of a shaky financial future? Consider carefully the option of appointing a business LPA.

Find out more. Call us on 0116 473 6133 or send us an email.

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