A Power of Attorney is a document which allows someone to nominate other people to act on their behalf. They are mainly used in two circumstances - where someone will be unavailable at a crucial time, for instance someone who will be out of the country when they are due to complete on the sale or purchase of a house, and the other main use is when someone is worried about losing mental capacity and not being able to manage their affairs.
In the first case, you would normally use what is called a general power of attorney. This would specify who is to be appointed and what they were to be authorised to do.
In the second case, where there is a risk of mental incapacity, the Donor (the person giving the power), must execute an Enduring Power of Attorney. The main difference being that a Power of Attorney will end if the Donor should become mentally incapable whereas an Enduring Power of Attorney will continue to be effective.
It is important to note that in the UK Powers of Attorney can cover decisions regarding the donor's health but this is not the case in the Isle of Man.
When considering what is required of an Enduring Power of Attorney, there are a number of questions to ask.
- Who do I want to act as my Attorney?
- When do I want this Power to become effective?
- Do I want any limitations or restrictions on what property, such as my house, my Attorneys can deal with?
- How many Attorneys do I want?
The most important factor in choosing who you want to act as your Attorney is that it is or they are someone you trust.
There is no formal requirement for who may be appointed, and many people appoint family members or close personal friends to act for them.
Many professionals such as Advocates or Accountants are also willing to be appointed, however they are likely to charge for their services.
Under an Enduring Power of Attorney, it is usually a good idea to have at least one attorney who is familiar with you and your affairs, as this will make matters much simpler should you become mentally incapable.
When should the power become effective?
The main issue to address when answering this question is whether the power is to become effective before the Donor becomes mentally incapable. This is a trade-off between control and flexibility. If the Donor states they want the power to be effective immediately then the Attorney will be able to deal with the Donor's property whilst the Donor is still mentally capable.
Alternatively, the Enduring Power of Attorney can be drafted in such a way as to not to come into effect until the Donor has lost mental capacity. This means that so long as they are mentally capable of dealing with their own affairs, no one else will be able to deal with the Donor's property without their consent. The downside to this is that a great deal of flexibility is lost as the Attorneys simply have no power to act until a Doctor declares the Donor to be mentally incapable.
What about any limitations?
An Enduring Power of Attorney can be drafted in such a way as to include various restrictions on the limits of the Attorneys authority. The classic example is a restriction that so long as the Donor is mentally capable, the Attorney's may not sell the Donor's house. Again, the restrictions reflect a trade-off between the flexibility to have the Attorneys do as much as possible to assist the Donor, and the Donor's wish to retain control whilst they are able and protect themselves against the possibility of someone taking advantage of them.
How many Attorneys?
One of the ways in which some Donors seek to ensure they are better protected is to appoint more than one Attorney so there are two people making decisions. This does mean finding someone else, potentially a professional such as an Advocate or Accountant, to become an Attorney with whoever else the Donor has chosen.
As they get older, many people have informal relationships with family members and close friends which allow people to give them the help they need. The advantage to the system of Enduring Powers of Attorney which the Isle of Man enjoys is that this relationship can easily be formalised in order that third parties such as Banks can see that the person who is trying to help is lawfully authorised to do so.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.