Tax & Estate Planning

7 reasons all business owners and senior execs should have a Lasting Power of Attorney

By February 3, 2020 No Comments

In the last 12 years, three million Lasting Power of Attorneys (LPAs) have been implemented. Designed to help people to manage their financial or health affairs when they lose capacity, an LPA plays an important part in the financial planning process, especially if you own your own business.

And, with the Alzheimer’s Society suggesting that more than one million people in the UK will have some form of dementia by 2025, it’s vital that an LPA is put in place to enable you to keep control of your affairs.

Here are seven reasons that all business owners and senior execs should have a Lasting Power of Attorney.

  • You don’t know when the worst might happen

An LPA isn’t just a necessity once you get older. The idea of an LPA is that it allows you to appoint someone you trust to manage your affairs when you lose capacity.

Of course, none of us know when that is going to be. Even if you’re in rude health, an accident or unexpected incident could leave you unable to make health and financial decisions for yourself.

Putting an LPA in place (and keeping it updated) means you always have the peace of mind that your interests are protected – whenever this becomes necessary.

  • You can nominate a trusted person

Without an attorney in place, it could take time for a deputy to be appointed. If you lose capacity, another person (often a family member) will have to apply to the Court of Protection. The Court will decide whether this person is suitable to become a deputy and to make decisions on your behalf.

In the worst-case scenario, an independent person may have to be instructed to act on your behalf. If you can’t make important decisions and there’s no one to speak on your behalf, the Court will instruct an independent mental capacity advocate to protect your rights.

Who would you rather have acting for you? Someone you know and trust, or a Court-appointed stranger?

  • Your business is protected

There are two standard types of LPA:

  • Property and financial affairs – this gives your attorney the power to make financial decisions such as paying bills, managing savings and investments and selling your home
  • Health and welfare – this gives your attorney the power to make decisions about your daily routine and medical care.

If you’re a business owner, then a third type of LPA – a business LPA – can really benefit you.

A business LPA allows you to appoint suitable attorneys (see below) and provide specific, legally binding instructions that outline their powers and the way they should be exercised.

For example, your attorney could instruct existing employees to perform key tasks or employ new people to fill a skills gap. They would also be responsible for complying with any professional regulatory requirements.

If you have multiple business interests, you would typically put a different LPA in place for each of those interests. This allows you to nominate the right attorney in each case, and to outline their specific responsibilities and restrictions with regard to each business.

  • You can keep control

An LPA allows you to keep control by limiting the powers of the attorney you nominate. You can clearly state preferences and instructions on your LPA to ensure your wishes are carried out.

For example, you might state that you:

  • Should live within ten miles of relatives
  • Only wish to invest in ethical funds
  • Should only move to a care home when a doctor says you can no longer live independently
  • Want to continue a regular donation to a charity
  • Should receive monthly statements, and that copies of these should be sent to nominated family members
  • Want your cat or dog to live with you as long as possible
  • You can appoint multiple attorneys

When you put your LPA in place, you can grant rights to several different people if you wish. You can appoint specific attorneys for certain roles and, if each has individual decision-making responsibility, you will still have representation if one of your attorneys dies.

This is particularly important when considering a business LPA. The attorney you nominate to look after your business affairs should:

  • Understand your business
  • Understand what it is they are being asked to do, and the limits of their powers
  • Have the experience and skill to make the decisions you want them to make

For example, your attorney may be another director or partner within your firm. In many regulated professions, the management of a firm can only be carried out by a suitably qualified professional. For instance, if you are a partner in a firm of Chartered accountants then any business attorney you appoint will also need to be a Chartered accountant.

  • You can use an LPA for temporary incapacity

Many LPAs can be used as a permanent arrangement. However, there are other instances when a business owner or director might temporarily lose capacity.

For example, an accident could leave you unable to make decisions for a short time, but you may eventually make a full recovery. Or, you may retain the ability to make decisions but might not have the physical capability to undertake your role – perhaps while undergoing aggressive medical treatment.

In these cases, an LPA can be a useful solution.

  • It can speed up the process

Putting an LPA in place ensures your trusted attorney can make decisions as soon as the LPA is registered. With no LPA, there could be a significant delay in putting appropriate arrangements in place.

It can take the Court of Protection several months to appoint a deputy, and this could leave your family or business in a difficult place in the interim.

Get in touch

If you need advice on how an LPA can help you, please get in touch. Email info@henwoodcourt.co.uk or call 0121 313 1370.