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Whilst some people are under the impression that preparing a Lasting Power of Attorney (LPA) is simply a case of completing a form and ticking a few boxes, it is about far more than this, therefore, seeking the right legal advice is important.
Not surprisingly, when most people decide to prepare LPAs they want to appoint their nearest and dearest, their spouse or civil partner, but is that really the best thing to do and what problems could it lead to later?
An LPA document for property and financial affairs generally grants the attorney(s) the authority to sell the donor’s property, however, what happens when the property is held in joint names as tenants in common and one of the owners loses capacity to make decisions about their own property and financial affairs?
When property is held jointly as tenants in common, the legal owners are deemed to hold the property on trust as trustees; to sell, two trustees will be required to sign. Whilst an attorney would have authority to sign on behalf of a trustee who does not have the capacity to deal with the property sale, the same person could not sign on behalf of both parties in different capacities.
Example of the issue
Mr & Mrs Smith own a property as tenants in common. In 2015 they prepared LPAs for property and financial affairs, appointing each other. It is now 2018, and Mrs Smith needs to move into residential care following a deterioration in her mental health. In order to facilitate Mrs Smith’s move, the property needs to be sold. Mrs Smith does not have the mental capacity to deal with the sale of the property and, therefore, is an incapable trustee. Unfortunately, Mrs Smith only appointed her husband as her sole attorney. Mr Smith can either act in his capacity as trustee or as attorney for Mrs Smith, but not both.
Whilst Mr Smith still has mental capacity, he can decide to prepare another LPA appointing a further attorney. They could then sign on his behalf whilst he signs in his capacity as Mrs Smith’s attorney. Mr Smith may not be particularly happy with the additional cost implications of having to prepare a second LPA. If he had been properly advised, this scenario could have been avoided. It is also possible Mr Smith only becomes aware of the problem late in the day, and, therefore, the delay in preparing and registering a new LPA could cause the sale to fall through.
A further problem
If Mr Smith either dies or doesn’t have capacity, and is, therefore, unable to either appoint a new attorney or act in his capacity as attorney for Mrs Smith, this will compound the problem further. An application to the Court of Protection for the appointment of a deputy for Mrs Smith is now looming, with a further application for the removal of an incapable trustee under the Trustee Act 1925.
Particular attention should be paid to the specific terms of the Court of Protection order. A typical order appointing a deputy often doesn’t include permission to sell property and will almost definitely not include authority to sell jointly owned property. If this is the case, further authority will need to be sought to address this point specifically. Applications to the Court of Protection attract an initial application fee of £400 per application, this is before even looking at the legal fees. Typically the Court of Protection can take six months to issue an order for the replacement of an incapable trustee.
Avoiding the problem
Mr & Mrs Smith’s problem could have been avoided had they been advised to appoint another attorney, preferably younger, along with each other. Simply ticking the boxes on an LPA is not always sufficient if the client wants to avoid the risk of ending up in the Court of Protection, along with all the associated costs and stress. Full advice should be obtained at the outset.
if you have any questions or would like more information about the issues raised in this article, please contact Clare Burke.
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