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The Millennium Bug in Enduring Powers of Attorney

14 Dec 2016

Enduring Powers of Attorney (‘EPA’) could be made up until 30th September 2007 when they were replaced with Lasting Powers of Attorney (‘LPA’). Although no new EPAs can be created, an existing EPA signed before 1st October 2007 remains valid. However, if the person who made the EPA (the ‘Donor’) is losing or has lost mental capacity, this must be registered with the Office of the Public Guardian.

It is common for EPAs made by married couples to appoint each other as Attorney. However, if your EPA was prepared on this basis and made before March 2000 and was not registered prior to March 2001, then you may wish to consider reviewing your EPA.

Under the original rules governing EPAs, if a husband and wife appointed each other as Attorney and one of them subsequently lost capacity, the survivor could act in relation to the incapacitated spouse’s financial affairs. If the couple owned a property in their joint names then their authority under the EPA allowed them to sell the property (acting as an Attorney and a co-owner) and give a valid receipt for the sale proceeds.

However, the rules regarding the way in which an Attorney could deal with property owned by them and the Donor subsequently changed, resulting in the surviving spouse no longer being able to sell the property and give a valid receipt for the sale proceeds, without adding someone to the legal title of the property.

For EPAs made after March 2000, this is generally straightforward as the changes to the rules gave the Attorney the power to add someone to the legal title.

However, for EPAs made before March 2000 and not registered until after March 2001, the rules have changed to the detriment of both the Attorney and the Donor where they are a married couple and own their property in joint names.

For EPAs falling into this category, if the Donor loses capacity then the Attorney cannot sell the property and give a valid receipt for the sale proceeds without adding an additional person onto the legal title. However, they do not have the authority to do this. The only way they can action the sale of the property in such circumstance is to apply to Court to remove the incapacitated spouse from the legal title and add someone else in their place.

And so we have a fly in the ointment for those who are caught in this situation, a millennium bug in EPAs if you will.

As previously recommended, if you have an EPA, it is advisable to review it to ensure it is still relevant and applicable to your circumstances. It may be that it is more appropriate for a new Lasting Power of Attorney to be entered into by the Donor in order to avoid any issues in the future which have been created by the historical changes to the rules governing EPAs.

For further information or advice, please contact Alice Clewes, Partner in our Private Client team.

Call: 0191 232 8345

Email: Alice.Clewes@hay-kilner.co.uk