This article seeks to provide advisors with an essential overview of powers of attorney and how instructions by attorneys should be handled.
Powers of attorney (POA) are documents which enable individuals to appoint a specific person to act on their behalf, known as an “attorney”. The powers contained in a POA are most commonly used when an individual loses capacity or is out of the country for a period of time. POAs are governed by the Adults with Incapacity (Scotland) Act 2000 (“the Act”). The Act refers to someone who grants a POA as “the Adult” which is how I will refer to them throughout this article. The Office of the Public Guardian (“the OPG”) is the public body that deals with POAs and guardianships including registration, amendments and attorney conduct complaints.
POAs in Scotland are strictly construed, meaning attorneys cannot exercise a power if it has not been granted.
There are two different types of powers that can be granted: The continuing – or financial -powers and the welfare powers. Usually, these powers are contained within the same document.
Continuing powers
Continuing powers are usually drafted broadly, meaning that some powers may seem irrelevant to your client now but, as life circumstances can change rapidly, these powers may become relevant in the future. Examples of continuing powers include: having access to the Adult’s bank account, purchasing and selling heritable property, drawing down on their pension etc. The attorney can also be granted the power to run, sell, wind up a business but there are certain decisions that only directors of companies or partners in a business can make. You should defer to the articles of association or a partnership agreement to ensure that the person providing you with instructions has the power to do so.
A common power given to continuing attorneys is to make gifts from the adult’s estate to individuals or charities. This can be helpful for Inheritance Tax planning purposes, in particular where the Adult has already established a pattern of regular gifting that they wish to continue even if they become incapable. If you receive an instruction from an attorney to make a gift, you must ensure that they have the power to make that gift to that particular person or organisation. If they do not have the power and you action their instructions, the beneficiaries of the Adult’s estate, or the indeed the Adult themselves, may have a claim against you.
The continuing powers will usually come into effect once the document is signed and has been registered with the OPG. However, the Adult may have stipulated a requirement that two doctors confirm they no longer have capacity before these powers are exercised so, again, the document should be reviewed before any instructions from attorneys are actioned. The powers will come to an end when the Adult dies and their executors step into their shoes.
Welfare powers
The welfare attorneys’ powers relate to personal decisions the Adult makes about their day to day living including: how they dress, where they live, with whom they consort and any medical decisions. These powers only come into effect once the adult has become incapable.
Choosing attorneys
When the Adult is choosing attorneys, they should always ensure that they nominate individuals they trust. Sometimes that will be their family members. Sometimes it won’t. Different attorneys can be appointed for each type. Perhaps the person they know would look after their finances well (the continuing attorney) would not be the best person to decide whether they continue to live at home or move to residential care (the welfare attorney). If the Adult has more than one attorney, they may be able to act alone or may require that they make decisions together. The power of attorney itself should state this clearly and you should ensure you have instructions from all attorneys if they cannot act alone.
As an advisor you may be asked to act as an attorney due to your knowledge of the adult’s finances and circumstances. If you are asked to do this, you will usually be asked to sign a consent form confirming that you agree to act. You should not act if you do not feel comfortable doing so. The OPG has guidance you can refer to regarding attorney duties and responsibilities.
Conclusion
If you are advising a client to put in place a power of attorney, they should instruct a solicitor.
If you are taking instructions from attorneys on behalf of an Adult you should ensure that the attorneys have the power to provide those instructions to you.
On the death of a client, the power of attorney is no longer effective and you should only take instructions from the deceased Adult’s executors.
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.
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