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Ensuring Lasting Powers of Attorney fit rural businesses’ needs

02 Dec 2021

A Lasting Power of Attorney (LPA) is a legal document by which you (the donor), give another person (the attorney) of your choice the ability to make decisions on your behalf if you become incapacitated for any reason, or whilst you have capacity but you are unable to deal with your assets yourself – and as well as being applicable to control of your personal assets, an LPA can also be used to manage business assets too.

An LPA ensures that there can be continuity within a business when the main decision-maker is either temporarily or permanently unable to fulfil their usual role, that their wishes are known and understood, and that the information and knowledge required to keep operations going as they wished are available.

Who you choose to take on what is a sizeable responsibility, and the issues that you need to think about when reaching this decision demand very careful consideration, as they will have a significant impact on both the future prospects of your business and the life of the person that you ask to do the job.

The nature of farming businesses makes this task a particularly important process, as it’s commonplace to find a farmer who is at or past the usual retirement age still running a farm, and it might seem natural for the responsibility to be passed to their spouse, grown-up children or other family members.

However, if they have chosen to go down a different career path and therefore know little about the workings of the farm, or they are living a long way away from home, are they going to be the right choice in practice, regardless of what morally might feel like the right thing to do?

Taking on the role of an attorney represents a very significant commitment, and the worst-case scenario would be for the person appointed to do so without a clear understanding of what will be required, only to then walk away from the role if is proves too much for them or they don’t feel equipped to carry it out properly.  If the donor still has capacity, a new LPA can be prepared and registered, but if the donor has lost capacity, this option is not available.  Instead, someone would need to take positive action and apply to the Court of Protection for a Deputyship Order.

The Court of Protection would, in such instances, appoint someone to act as a Deputy, but as things stand, a backlog of cases means it could take up to a year for them to do so.

 

Power of Attorney

That sort of delay could have serious consequences for a business in any industry, let alone one as time-sensitive and labour intensive as farming.

Another important consideration if your farm is run as a partnership, is whether your partnership agreement actually allows an attorney to act for a partner, and whether, depending on who takes on the role for you, it might potentially create any conflicts of interest within the business.

The essential starting point for this sort of situation is to have an open and honest conversation with the person/people who you are considering having as your attorney(s) and all other relevant parties within your family and/or business.  Would it be better to have two LPAs – one for personal assets and one for the business?

Ensure that they all understand your view of how the business would operate in the future, have access to all the key information and data that will enable them to act on these specifications and appreciate what will be required of them to do so before they agree to sign on the dotted line.

No-one likes to think of situations arising where the stipulations of an LPA have to be put into practice.

However, it is much better to have these difficult conversations now, while there is time to cover everything off in detail, rather than having to urgently deal with difficult issues arising if something happens out of the blue or leaving people to pick up the pieces in your absence without having everything they need to do so properly in what may be a challenging enough situation already.

For further information on all aspects of drafting and implementing Lasting Powers of Attorney, please contact Kirsty Allen on 0191 232 8345 or via kirsty.allen@hay-kilner.co.uk