Making an E.P.A is easy or is it? - Elderly Client Adviser

Feature

posted 1 May 1999 in Volume 4 Issue 4

Making an E.P.A. is easy or is it?

It seems such a harmless document, a double-sided A4 sheet, with easy gaps to fill in, for the Donor to sign and to be put away in a strong room. Never has such a harmless looking piece of paper had a time bomb ticking away on it. It is necessary for every practitioner, not just those dealing with the elderly, to be aware of the do's, don't and dangers. It is so easy to be distracted, in a rush, eager to please the client, delegate the task to a junior member of staff, but at all times we must remember we are consulted for advice and guidance, not just to fill in a form. The aim of this article is to provide a checklist of steps to be taken when obtaining instructions and preparing Enduring Powers of Attorney and some practical tips.

A. IDENTIFY THE CLIENT

Why?

1. The Donor is the client, not the Attorney nor a third party.

2. There may be a conflict of interest between the Donor and the Attorney.

3. You need to ascertain who you are establishing capacity for.

4. Enduring Powers of Attorney Guidelines for Solicitors, prepared by the Law Society's Mental Health and Disability Sub-Committee, set out very clear guidelines, which if not followed may lead a practitioner to risk claims for breach of the professional conduct or, even worse, negligence.

CHECKLIST

1. Is the person instructing you the Donor?

2. Does the Donor have their own Solicitor?

3. If yes, does he or she wish to instruct their own Solicitor?

4. Have you obtained written instructions from the Donor or, preferably have you seen the Donor personally?

5. Is there any question that instructions have been given under duress or undue influence?

6. Have you seen the Donor client on their own?

7. Is there a potential conflict of interest between the Donor and the proposed Attorney? For example, is the proposed Attorney an owner or manager of a residential home or nursing home where the Donor resides?

8. Have you given independent advice, i.e. without regard to the interests of any other person or third party?

B. IDENTIFY THE NEED

CHECKLIST

1. Should it be:-

(a) An Enduring Power of Attorney, General Power (Powers of Attorney Act 1971) or Trust Power (Trustee Act 1925) or Receivership.

(b) In conjunction with arrangements for Agency, Social Security appointeeship, third party mandate, transfer into joint names.

2. Does the Donor have foreign assets?

3. Is the Power to be for the Donor's personal assets or is it in his or her capacity as trustee?

4. Is the authority of the Power intended to extend further than financial and business affairs, for example medical powers?

Foreign Assets

It is a fundamental principle that an Enduring Power of Attorney is limited in extent only to England and Wales. It does not extend to Scotland (or to other countries) and, therefore, if the Donor has assets elsewhere the Attorneyship for each of those countries must be addressed.

Presently the Government is seeking views on proposed international arrangements for deciding questions about the protection of mentally incapable people and their property in foreign countries and has issued a consultation paper - Mental Incapacity Draft Hague Convention on the Protection of Adults (April 1999). The Convention deals with the protection in international situations of a person and property of adults who are mentally incapable of protecting their own interests and its aim is to set out rules for the recognition of laws in various countries. It may lead to an internationally recognised Power of Attorney.

Medical decisions

An Enduring Power of Attorney does not give authority to make decisions about medical or personal care. This is a point that is very often not made clear at the outset to the Donor or later to the Attorneys. If the Law Commission recommendations on Mental Incapacity (Law Commission No. 231) are implemented, these will provide the framework within Powers of Attorney of decision-making powers for personal welfare and health care. While it is an acceptable responsibility for professional Attorneys to make financial and legal decisions, if this is extended to include making decisions regarding the termination of life support, consent to operations, exercise of advance directives, Solicitors may be reluctant to take on such roles.

Practice

It is essential to advise clients, in a standard brochure or letter, that the Power only extends to legal and business matters, not to personal care or welfare.

Trustee Powers

The present position is that Enduring Powers of Attorney are favourable to Trustees because, contrary to s.25 Trustee Act there is:-

(1) No restriction on Donor appointing a co-Trustee as Attorney

(2) Single Attorney could therefore give valid receipt for capital.

(3) E.P.A.'s last for ever and do NOT lapse after twelve months.

However, Clause 4 of the Trustee delegation Bill repeals s.3(3) of the E.P.A. Act 1985. The effect of this is that trustees will only be able to use s.25 Trustee Act powers (as amended by the Bill). Repeal will apply to A.P.A.'s created after commencement of the Act.

There are transitional provisions for E.P.A.'s created before commencement of the Act.

C. CAPACITY OF THE DONOR TO GRANT THE POWER

Increasingly the major Institutions are questioning this, particularly if the Power was made over five years before use as an unregistered Power. The medical profession acknowledge that it is very difficult, if not impossible, to ascertain capacity "with hindsight".

CHECKLIST

1. The Donor must be able to understand that:-

(a) The Attorney could assume complete authority over the Donor's affairs.

(b) The Attorney would be able to do anything with the Donor's property which the Donor could have done.

(c) The authority will continue even if the Donor should become mentally incapable.

(d) If the Donor becomes mentally incapable, the E.P.A. cannot be revoked without confirmation of the Court of protection.

2. Have you seen the donor personally to assess the capacity?

3. Is a written medical opinion available or should one be obtained?

4. Should the Enduring Power of Attorney be witnessed by a medical practitioner?

Practice

Establish a procedure to update Enduring Powers of Attorney in the same way as Wills.

Make sure any attendance for taking instructions from a Donor is recorded in writing, identifying that consideration has been given to all the above.

D. CHOICE AND SUITABILITY OF THE ATTORNEY

Practice

Every practitioner should have a standard letter/brochure advising the Donors of the risks of making Enduring Powers of Attorney and the solutions to protect them and their assets. Please see table opposite.

E. FORM AND VALIDITY OF THE E.P.A.

CHECKLIST

1. Is the form as prescribed by the E.P.A. Prescribed Form Regulations 1990 (SI 1990 number 1376) in force at the time of execution by the Donor? The present regulations - E.P.A. Prescribed Form Regulations 1990 (S1 1990 No. 1376) apply to all E.P.A.'s made from 31st July 1991 onwards.

1986 Regulations

E.P.A.'s made 10/3/1986 to 30/6/1988

1987 Regulations

E.P.A.'s made 1/11/1987 to 30/7/1991.

2. Is the explanatory information in Part A included, and all the marginal notes? If you are not using the standard printed form and the word processor removes or makes a line, any mistake or omission, it can lead to invalidity. With the advent of laser forms, it is essential to use these and not have individually prepared Enduring Powers of Attorney on the word processor. No departure from the prescribed form is permitted (Practice Direction 1989 2 AER 64).

3. Does the Power appoint the Attorneys either jointly or jointly and severally? Have the correct deletions on the form been made?

4. Does the Power show the nature of the authority, i.e. has one of the options been deleted. Is it a general authority or authority to perform specific acts?

5. Does the Power show the extent of the property over which the Attorneys have authority, i.e. all the property or specified property? Has one of the options been deleted?

6. Is the Power dated?

7. Is the Power dated by the Donor after the Attorneys signed and dated? This is a very common mistake and usually arises from a lack of explanation to the Donor and makes the E.P.A. invalid.

Practice

Prepare a standard letter accompanying the E.P.A. with instructions for signature.

8. Witnesses - Is the E.P.A. properly witnessed? N.B. the witness must not be the Attorney. It is also desirable to avoid the husband or wife of the Attorney, which could strengthen a case for an E.P.A. to be made void if there was any query as to capacity.

9. Is any special attestation clause necessary? For example, is the Donor blind?

10. Have the Attorneys signed before the Donor becomes incapable? This is essential to the validity of an Enduring Power of Attorney.

11. Does the power give a right to appoint a substitute or successor? If so, the Power will not be valid as an E.P.A. In practice, many clients want a substitution. The solution is to have a number of Enduring Powers of Attorney. There is no restriction on the number of Powers of Attorney which can be in existence at any one time.

12. When is it to come into operation?

(1) Is it to be immediate?

(2) Is it to come into effect on a specified date or event? (eg. if a second E.P.A. is being signed to allow for a successor or substitute).

(3) Is it to take effect only when the Donor is becoming or has become incapable?

Note - if nothing is said, an Enduring Power of Attorney will take effect immediately. To counter this there must be a specific expression.

13. Are the Attorneys over 18 and not bankrupt?

14. Revocation - Is an express revocation clause required? Unless this is done, all previous E.P.A.'s will still remain in existence. Note - revocation must be made by Deed and therefore must be included in an Enduring Power of Attorney itself or on a separate Deed of Revocation, with a simple clause e.g. "I revoke all former Enduring Powers of Attorney made by me".. In most cases it is preferable for there to be a revocation but in a recent instance the existence of two Enduring Powers of Attorney protected a client. An E.P.A. was made appointing two Solicitors as Attorneys and placed in the firm's strong room. Six years later the Donor's Bank advised the Solicitors that they were concerned about moneys disappearing from an account under the operation of an Enduring Power of Attorney more recently given to the Donor's niece. As the second Power of Attorney had not revoked the first, both Enduring Powers of Attorney were valid and the first one was registered successfully. However, the downside is that Attorneys may be holding E.P.A.'s which co-exist with the authority given in other existing powers.

Practice - Notify a Donor's Bank that an Enduring Power of Attorney has been prepared, although it is not in use at the present time.

Never hand a blank form to a client or another member of your firm without clear instructions for completion. Institute a policy and a practice management standard to this effect.

F. POWERS OR RESTRICTIONS CHECKLIST:-

1. Should any transactions be forbidden/restricted? For example, to be done with the consent of another party, e.g. sale of a property or specific assets.

2. Gifts - Does the Donor anticipate that gifts/transfers of any substance may be appropriate? For example, for Inheritance Tax planning purposes.

Note - Many Attorneys are in the position, with registered Powers, where gifts of assets would be a sensible strategy for Inheritance Tax planning but, due to the restrictions of s.3 (5), this requires the agreement of the Court of Protection. It is to be noted that under s.3 (4) of the Enduring Power of Attorney Act that it appears possible only to make further condition or restriction over the Power to benefit, not to confer wider powers than those specified in s.3(5). Donors of E.P.A.'s should be advised of the restriction. The words "Your Attorney can do whatever you could do" need to be qualified.

3. Accountability - The Court of Protection has power to call upon an Attorney to produce documents or produce Accounts only when an E.P.A. has been registered. Consider a provision requiring an Attorney to keep Accounts, with a sanction imposed for failure to do so. Even if it is not proposed as a requirement of the attorneyship, the writer believes that all professional Attorneys actively acting as Attorneys should prepare annual Accounts and submit these to the Donor, if appropriate, or if not to retain these on file. Practitioners may often advise that Receivership provides far greater control because of the requirement to the Receivers to produce Accounts to the Public Trust Office on an annual basis. However, a Report from the National Audit Office of April 1999, discloses that in 1996/97 over 40% of private Receivers did not submit an account of how they had used the patient's money, even though they were required to do so and were not chased to do so.

Practice

On acceptance of Attorneyship as professional, set out the steps that would be taken, e.g. the preparation of annual Accounts.

4. Investment and delegation - Are further powers need? In principle, an Attorney cannot delegate his powers. If the Donor has a portfolio of investments, a wide power of delegation must be expressly provided. For example:-

"The powers of investment of any Attorney of mine shall include power to make use (on any terms and without being liable for loss) of any discretionary management scheme operated by stockbrokers, investment managers or others which involves investment decisions being taken by those operating the scheme and investments being held by a nominee or nominees".

Alternatively or in addition, the Donor may wish to place a restriction on the investment powers of the Attorney.

5. Charging Clause - It is debatable whether a specific clause is required in the E.P.A. but the Enduring Powers of Attorney Guidelines for Solicitors recommend that the Solicitor's current Terms and Conditions of Business, including charging rates and frequency of billing, are discussed with and approved by the Donor at the time of granting the Power. It therefore seems an appropriate approval to include a charging clause in the Power of Attorney, for example:-

"Any Attorney of mine being engaged in a profession or business shall be entitled to be paid all usual professional and proper charges for business transacted, time expended and acts done by him or his firm pursuant to this Power of Attorney including any acts which an Attorney not being in any profession or business could have done personally."

6. The Donor's Will - Any specific instructions?

Solicitors are under a duty to keep their clients' affairs confidential (Guide to the Professional Conduct of Solicitors, 7th Edition, 16.01). However, sight by an Attorney of a Will may be helpful or indeed necessary for the proper conduct of the Attorneyship. Ascertain from the Donor whether disclosure is to be made or the circumstances in which it is permitted and include a provision in the E.P.A.. For example:-

"Any person holding my Will or a Codicil to it ("the Holder") may treat this as their authority to disclose the contents to my Attorney(s) if this power shall have been registered".

Summary

These Checklists are not exhaustive but seek to identify critical areas. All practitioners should have to hand:-

1. Suitable Checklists.

2. The Enduring Powers of Attorney Guidelines for Solicitors - Law Society 1996 (available from Publications Department, Law Society, 50 Chancery Lane, London, WC2A 1SX or DX 56 London/Chancery Lane).

3. Up-to-date printed prescribed forms or access to up-to-date laser forms.

4. Practice Management Standards for making and checking of Enduring Powers of Attorney.

Amanda King-Jones, Partner, Thomas Eggar Church Adams