The use and potential misuse of LPAs has been a subject of controversy in the private client legal and wealth management field for some time. The UK government is planning reforms, including making these powers more digital-friendly. What are the risks to this approach?
The UK government recently rekindled a debate by proposing changes to the Lasting Powers of Attorney system. The authors of this article, Tim Snaith and Samantha Warner, are partner and associate, respectively, of the private client team at law firm Winckworth Sherwood.
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The government created some excitement in the estate planning world a few weeks ago when it launched a consultation into its proposed overhaul of Lasting Powers of Attorney (“LPAs”). An LPA is a legal document that enables the person making the LPA (“the donor”) to appoint those they trust to act as their attorneys in relation to financial and/or health decisions. With an ageing population, and banks and others are increasingly insisting on only dealing with named account holders, LPAs have understandably seen a real rise in popularity.
Launched in 2007, LPAs represented a significant change to the old Enduring Power of Attorney (“EPA”) system which had been in place since 1985. LPAs brought with them a modified approach to the question of mental capacity and a far more collaborative way of working with the donor. It also created the Office of the Public Guardian (“the OPG”) to administer and maintain a register of LPAs. Today, there are over 4.7 million LPAs and EPAs on that register, with around 917,550 having been registered in 2019/20 alone.
The LPA system was undoubtedly a change for the better, but the increased protections made the documents and the process more complex. As a result, 14 years on, the government has considered what improvements could be made and has published a set of proposals to modernise LPAs. The consultation is open to all and runs until 13 October 2021.
Reducing complexity, saving paper and time
Each LPA is over 20 pages long, requires a minimum of six signatures, and must be signed in a strict order. This complexity not only leads to errors but can also act as a significant deterrent to those considering creating LPAs.
Although LPAs can now be created online, the legislation requires the final completed forms to be printed out, physically signed, and then posted to the OPG for registration. This process led to around 19 million sheets of paper being received by the OPG in 2019/20, with a similar number of sheets being sent out to the public.
The error rate is also high. Around 19 per cent of LPAs submitted to the OPG by members of the public, and 6 per cent of LPAs submitted by solicitors, cannot be registered as they contain errors, and the OPG is unbending in its approach to corrections. Where OPG staff could easily email the donor to check the spelling of a witness’ middle name, they reject imperfect documents and return them for resubmission instead. Even at the lowest error rate, in excess of 55,000 documents are processed, reviewed and returned every year.
This not only causes delays at what can be a very difficult time for families, but if the donor has lost mental capacity since the document was signed, it will render it invalid and the attorneys will find themselves facing a costly and time-consuming application to the Court of Protection instead.
The government evidently sees digitisation as both the sustainable way forward and the solution to reducing errors.
The role of the witness
One of the more radical proposals is to replace physical witnesses with a digital ID verification and signature procedure. Given that witnessing errors make up 74 per cent of errors on imperfect LPAs, it is easy to see why this suggestion has been raised, but will removing the human element remove an essential safeguard, and lead to an increase in the fraudulent creation and use of LPAs?
The government doesn’t think so. It argues that witnessing provides very limited protection and proposes to rely on the “certificate provider” to confirm that the donor is aware of the nature and effect of the document and that s/he has sufficient understanding to be able to enter into the LPA. There would then be a conditional registration system under which the OPG runs a digital ID check on the donor and the same ID check plus relevant criminal record checks on attorneys. Until those checks are passed, the LPA would not be registered.
Immediate registration and a fast-track
LPAs must also be registered with the OPG before they can be used. This was seen as an essential change from EPAs to increase oversight and to prevent abuse. However, an LPA does not need to be registered as soon as it has been signed and many people prefer to keep their LPAs signed but unregistered until they lose mental capacity or need help from their attorneys. As registration is the first time the OPG can check the forms, and 19 per cent are rejected, many errors cannot be rectified by the donor given that s/he has lost capacity. This is a significant issue.
The consultation therefore asks whether the legislation should be changed to require immediate registration or whether a checking system could be introduced at signing-stage to reduce the risk of rejection. The government appears to favour immediate registration, but it needs to think carefully about whether this would discourage those who perceive registration as handing over power to their attorneys too soon.
There is also a proposal for a dedicated fast-track, higher-cost service for those who need an LPA urgently. The government indicates that it would prefer to focus on streamlining the service for all and reducing the registration time to a tantalising 14 days but given the frequent delays beyond the current 40-day registration target, a dedicated fast-track is certainly an attractive option.
The ability for interested parties to raise concerns about registration is an essential safeguard in the LPA process, particularly if family or friends suspect undue pressure or a lack of capacity. Under the EPA system, the donor had to name a third party to be notified when the form was registered but this was removed in 2007 as many donors did not have a sufficiently wide social or family network and this section became a real obstacle. Instead, LPAs include an optional section where the donor can choose someone to notify. As it is not compulsory, it offers no safeguards and is rarely used. In short, it is confusing for the donor and verges on pointless.
The proposals discuss the range of people permitted to object to registration, but there is no suggestion of a replacement notification system. The government needs to give serious thought here to how family and friends can be made aware that an LPA is being made, not just how they can object when they eventually learn of registration.
Change welcome but care must be taken
LPAs and their predecessor EPAs have been around for 36 years, but they remain as relevant and necessary as ever. Many of the government’s proposals seem sensible but we have long been arguing that better training of OPG staff, better customer service, and a more flexible and pragmatic approach to correcting errors would solve many of the stresses and inefficiencies of the current system.
However, technology has moved forward significantly since 2007 and we hope it will enable the government to offer a collaborative and modern LPA system that also protects the elderly and vulnerable from fraud, coercion and abuse.