Finance Five Common Misconceptions About Powers of Attorney

A Power of Attorney is a binding legal document, one that effectively allows someone you nominate to make certain kinds of decision and act on your behalf. Powers of Attorney are usually used if you either become unable to work for yourself, or you do not wish to act for yourself.There are many reasons why you might choose to make one, including being out of the country or hospitalised for an extended period and you need someone to mind your assets while you are away; or to protect yourself and your assets should you lose mental capacity.However, a lot of us put this job off due to, among other things, certain misconceptions.This article aims to debunk some of the most commonly held misconceptions regarding a Power of Attorney.Misconception One: Attorneys, once nominated, cannot do whatever they likeThis is one of the main fears people have about giving someone else control over their assets. However, it is entirely unfounded as attorneys are heavily restricted in what they can and cannot do.There are various checks and balances in place to make sure an attorney does not abuse their position, including a set of rules regarding getting the power registered so it can be used at all.The first set of restrictions come from you. When creating a power, specifically a lasting power, there is an opportunity for you to put as many or as little restrictions on your attorneys. For example, if you are setting up a financial lasting power, to allow our relatives to look after your finances should you lose capacity, then you can state clearly on the paperwork that while your attorneys can do X, Y & Z they cannot sell your home, or they must all decide together before spending an amount over £X.


The second set of restrictions comes from the Office of the Public Guardian which lay down clear rules for how an attorney must behave, including preventing them acting outside the power given in the power and making sure they always act in the donor’s best interest.Misconception Two: You must use the Power of Attorney the moment it is made, or You cannot make a Power of Attorney until you know you will need it soon.A lot of us put this job off as we are not in the position where we need it now or (to our knowledge) in the imminent future.Unfortunately, life doesn’t always give you warnings and powers of attorney are not just for the elderly who may have concerns about dementia. Anything can happen that could cause you to need an attorney immediately, including a sudden and unexpected hospital admittance, an unplanned trip out of the country, or, tragically, an accident which causes you to lose capacity.It is wise to create a power long before it is needed, especially a lasting power of Attorney (expressly designed for a loss of capacity).It is entirely possible to write and sign a lasting power but keep hold of it until you need it or want to use it. This is because for a Lasting power to be used it must be registered until it is registered it is just a piece of paper with no power or purpose, and it can sit in a drawer until needed.You could easily create and sign a Lasting power when you are in your 30′s and not register it until you need it in your 70′s.Misconception Three: You can wait until someone loses capacity before making a Lasting Power of AttorneyThis ties in with the above misconception and is completely wrong. Making this mistake can cost you and your loved one’s thousands of pounds.To make a lasting power or a general power the person making it must have capacity. There is no way around this. If you lose capacity, you cannot make a Power of Attorney and your loved ones must apply for what is called a Guardianship of you and your assets, which costs over a thousand pounds and takes several months to sort out.Considering that you could put together a power yourself for free or use a solicitor for £200 (depending on the firm, shop around) it should be a no brainer that this is the superior document.It is also worth noting that if you make a general power and then lose capacity your general power loses all its power. If you had made a lasting power when you had capacity then subsequently lose capacity your attorneys can register the Lasting Power of Attorney with the Office of the Public Guardian immediately and start helping you with your finances and care.Misconception Four: A Power of Attorney is for LifeThis simply is not true.There are different types of Power of Attorney, Lasting and General. Lasting powers (you might have guessed from the name) are usually long term. However, a general power is not.


A general power is a document that you can set up to allow someone to look after an affair of yours while you are not able to, if, for example, you are out of the country, hospitalised for a few months or unable to leave the house for a while. A general power gives someone else authority to act on your behalf for a particular reason, to perform a specific task or for a specific length of time. As soon as you become able to manage your affairs again, you can destroy the general power.Misconception Five: You can only have one attorneyThe role of attorney is challenging at times, and there is a lot of responsibility.So rather than put all of that responsibility onto one individual you can spread that about by having more than one attorney. This second person is called a joint attorney.You can appoint any number of attorneys in the same power, and you can specify if they can act on their own separately or if they must cooperate and come together to decide. You can have them act jointly on some issues such as sale of property but have them work singly on all other matters there is a lot of flexibility, and it is entirely up to you.ConclusionIn conclusion, there is a lot to consider when making a Power of Attorney, but it is not a decision that should be put off.