Why minding your business may pay dividends?
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Introduction
We all hope that throughout our life we will be able to make decisions about our affairs including those which impact on our health and wellbeing. However, recent statistics have shown that 25% of the UK population will experience issues with their mental health which may mean they are unable to do this.
How can a Lasting Power of Attorney help?
A lasting power of attorney (LPA) is a legal document in which you authorise a chosen person (an attorney) to make certain decisions on your behalf if you lose mental capacity and are unable to do this yourself.
The decisions that you authorise your attorneys to make can be either in relation to your finances, for which an LPA for property and affairs will be created, or in relation to your personal life, where an LPA for personal welfare will be created.
Perhaps you feel that an LPA is not necessary as family members can automatically step in to make these decisions for you. Unfortunately, this is not the case as family members do not have an automatic right to make decisions on your behalf.
What to do if you run a business
If you run a business as a sole trader, through a partnership or through a company you should consider putting a business LPA in place so that your business can continue to trade in the event of you losing capacity. The remainder of this article will focus on the issues facing businesses which are trading through a corporate structure.
The importance of the articles of association
The articles of association set out the rules on how your company is run and so it is important to check these first to ensure you have authority to appoint an attorney. Most companies are covered by what are known as “Table A” articles which are a default set of provisions.
For companies incorporated on or after 28th of April 2013 under Table A articles, the Mental Health Discrimination Act 2013 provides that directors who have lost capacity must be supported in their role rather than removed from it. The only exception to this rule is if a medical practitioner confirms that the director will be unable to fulfil his or her role as a director for at least three months due to losing mental capacity.
If your company was set up under an earlier version of the “Table A” articles they will contain different provisions relating to the termination of a director's role due to mental incapacity and you may wish to consider updating these.
Can I have more than one LPA?
You can put any number of LPAs in place providing none of them conflict with each other. You could, for example, consider making an LPA for certain attorneys to manage your personal assets (i.e. your home and personal bank accounts) and another one to cover your role as a director.
If you are considering making personal and business LPAs, they should both contain specific instructions limiting the scope of the attorneys’ powers. For example, a personal LPA should specify that your attorneys will have general powers in relation to your personal affairs except for your role as a director which is covered under a separate business LPA. Your business LPA should contain specific instructions in this respect too. Your attorneys will then be clear about their powers and will not encroach on the others attorneys’ responsibilities and decisions. You may also wish to put a separate letter of wishes in place which gives your attorneys more guidance and direction on your vision for the business and the markets in which it operates.
You could, for example, appoint your spouse to make decisions about your personal property and affairs whilst someone with suitable experience as your attorney in relation to your role as a director. If you also own shares in the company these will be dealt with under your personal LPA rather than your business LPA. Therefore, you should consider carefully who should make decisions in relation to your shareholding in the company. If appropriate you may decide to create a separate LPA relating to your shareholding in the company.
In this example you would have three LPAs. The first one would relate to your personal assets whilst the second would relate to your role as a director and the final one would relate to your shareholding in the company.
Putting separate LPAs in place for your directorship and your shareholding avoids potential conflicts of interest arising.
Who should I appoint as a suitable attorney?
An attorney should be trustworthy, competent, and reliable. They should have the skills and ability to carry out the role.
When choosing a business attorney, you should consider:
- Does the individual have the necessary skill, ability, and experience to carry out the role? How have they demonstrated this?
- Do any regulations prevent their appointment?
- Are there conflicts of interest between the personal attorney and the business attorney?
What happens if I do not make a business LPA?
If you are unable to make a business decision in the future and have not made a business LPA, it may become necessary to make an application to the Court of Protection for the appointment of a deputy to act on your behalf. The process can be expensive and there are no guarantees that the Court of Protection will choose someone he would have chosen yourself. It could also take more than six months before a deputy is appointed, during which time your business may be vulnerable and at risk.
Summary
Whilst no one wants to think that they may not be able to make decisions for themselves or run their business due to a lack of capacity, it is important that the risk is considered as part of your risk management strategy. Putting a business LPA in place will certainly help minimise the risks of the company ceasing to trade due to a lack of management and decision making.
For further information on LPAs please contact Malcolm Emery.
2021 01 23
Malcolm Emery
https://www.legalstudio.co.uk/Team/Malcom-Emery
Financial Affairs of the Heart!
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FINANCIAL AFFAIRS OF THE HEART!
With hits such as “toxic” and “criminal” we probably should not be surprised by the recent court case that has developed between Britney Spears and her father.
What is a Conservatorship?
Due to Britney’s troubled past and her vulnerability, her father was appointed to look after his daughter’s financial affairs and wellbeing by the Court under an arrangement known as Conservatorship. This arrangement has been in place now for some 13 years and whilst Britney may not have had the mental stability to make decisions for herself when the Conservatorship was put in place, it appears that her mental state has clearly improved and she now wants to take control back for all aspects of her life. This is the decision that the courts must consider and decide on.
Can you put a Conservatorship in Place in the UK?
The UK does not have an equivalent of a Conservatorship although a trust is sometimes used to manage the affairs of an individual who is vulnerable or perhaps does not have capacity to look after their own affairs.
A trust can be a very flexible arrangement to manage an individual’s financial affairs, offer protection against undue influence and potential tax savings. The individuals who manage the trust are known as the trustees although their powers can only be used to manage the financial assets held subject to a trust. The trustees’ powers do not extend to making decisions about the beneficiary’s health and welfare.
The Benefits of putting Lasting Powers of Attorney in Place
If you have capacity to make your own decisions, there may come a time when this is not the case. To safeguard against this, you can put legal documents in place known as lasting powers of attorney. There are two different types. The first is known as a property and affairs LPA (PAFLPA) and allows the people you appoint (known as your attorneys) to make decisions about your financial affairs such as paying bills or buying/selling property.
The other type of LPA is known as a Health & Welfare LPA (HWLPA) and allows your attorneys to make decisions on your behalf about your health (i.e., medical treatment) or your welfare (i.e., living accommodation, how you live day to day, etc).
Your PAFLPA and your HWLPA cannot be used until they have been registered with the Office of the Public Guardian. Your HWLPA cannot be used by your attorneys unless you have lost capacity. Whilst your PAFLPA can be used before you lose capacity you can include a restriction in the document itself which specifies that it cannot be used unless you have lost capacity. This ensures that you retain control over all financial and health and welfare decisions until you are unable to make the decisions for yourself. A crucial difference from the conservatorship that Britney Spears is subject to.
A recent survey has identified that at least 25% of the UK population will suffer some form of mental health issue during their lifetime. Therefore, it is crucial that you consider putting PAFLPA and HWLPAs in place before it is too late.
For further information on the use of trust and LPAs to protect you and your family please contact Malcolm Emery.
2021 49 29
Malcolm Emery
https://www.legalstudio.co.uk/Team/Malcom-Emery
Spoilt for Choice
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We just wanted to say a big Legal Studio Thank You! to everyone who applied for our paralegal to trainee role.
We had an exceptionally high standard of applications on paper and everyone performed really well in the interviews. It's going to be a tough choice for us.
We know that it's difficult out there at the moment for aspiring lawyers to get started or to secure a Training Contract and we wish we could offer more opportunities (maybe next year).
In the meantime, we hope that all our applicants get the opportunities they fully deserve. Keep persevering and good luck to you all!
PS. The picture of Wolfgang (Wolfie) as a puppy was entirely gratuitous, as is the picture below now that he's grown up abit.
Wolfie at Long Meg in Penrith, Cumbria
2021 57 16
Matthew Dowell
https://www.legalstudio.co.uk/Team/Matthew-Dowell