Getting lasting power of attorney has become simpler in recent years. Kite Consulting’s Rachael Madeley Davies explains why farmers should put it in place.
Power of attorney (PoA) is a legal document which allows a trusted person to make decisions on your behalf, should you lose mental capacity.
If no PoA is in place, family members have to apply through court, which can be long-winded and expensive, leaving the farming business in the lurch.
There are two types of PoA. The first is about health and welfare.
This covers decisions regarding healthcare, medical expenses and last wishes.
The other is in relation to finance and property, and includes business decisions.
It is possible to have one PoA without the other, but it is good practice to get both.
As a business owner, you should give the second option serious consideration.
On a human level, it is a really good idea to get the health and welfare one as well.
This is so critical medical care decisions are carried out in a way and by someone you want.
The document is flexible. It can come in to effect before or after the holder loses the mental capacity to make decisions.
This could be from having a major accident, a stroke, dementia, or other event which affects mental capacity.
For example, if you go in to a coma the document would kick in and when you come out it would stop again.
These scenarios are already horrendous situations for a family to deal with, without the added uncertainty and expense of a legal process to secure the business.
Generally, people can organise lasting power of attorney themselves.
The two forms are available on the GOV.UK website.
Once downloaded, the documents need to be registered with the Office of Public Guardian.
Farmers in England and Wales pay £82 for each form, with prices varying slightly in Scotland and Northern Ireland.
Reductions are available according to income.
If farms have a complicated business situation such as integrated land and property, seek legal advice to ensure the PoA is watertight in order to prevent disputes.
"PoA should not be considered as an either/or with succession planning"
Rachael Madeley Davies
By creating a lasting PoA, you are setting up a mechanism for somebody to step in and run the business if you are unable to do so.
PoA should not be considered as an either/or with succession planning – rather a precursor to a wider plan about what is going to happen to the farm and its assets after it is passed on.
Good succession planning should be highly integrated and multi-generational, whereas PoAs can often be a short-term solution during an emergency.
What are the common scaremonger stories associated with PoA? The same types of stories are always rolled out against PoAs: ‘Your children or your nephew or whoever could use it as a tool to put you out of the business before you are ready, or before any mental capacity issues’.
These are simply not the case.
Mental capacity is enshrined in statute under the Mental Capacity Act 2005 where it defines when an individual no longer has mental capacity.
If you have PoA and it needs to be activated a ‘certificate provider’ (someone you have known for two years or someone with relevant professional skills such as a doctor, lawyer or social worker) makes the decision as to your mental capacity.
Anyone over the age of 18 can get one.
The key to this is to act early and to get one while you are still in control over what happens.
If you leave it too long you surrender that choice.
PoAs need to be amended if relationships or circumstances change and may be ended at any point.