Why are Lasting Powers of Attorney so important for farmers?

In the UK, it is anticipated that the number of people living with dementia will increase from 982,000 to 1.4 million by 2040, an increase of nearly 43% (Alzheimer’s Research UK).

Have you ever given thought to how you would like your affairs managed if, for any reason, you couldn’t make decisions for yourself?

“If we create something, we should aim to protect it” is sage advice, particularly when it comes to planning for the future and thinking about who you would rely on if you needed practical support.

The Mental Capacity Act 2005, which came into effect on 1 October 2007, introduced two types of Lasting Power of Attorney (LPA) – a Property and Financial Affairs LPA and a Health and Welfare LPA.

Property and Financial Affairs LPAs for farmers

A Property and Financial Affairs LPA allows your attorney(s) to deal with your property and finances and you can create multiple LPAs specifying which matters are covered by each one.  For example, you could have one LPA in place authorising your attorney(s) to make decisions affecting the operation of your farming business, and have another LPA in place authorising different attorney(s) to make decisions regarding your personal finances – after all, it may not be appropriate for the same person to make decisions regarding your farming business and also your personal finances.

The attorney(s) authorised to make decisions regarding your faming business (“the business attorney(s)”) may, for example, make decisions (unless you provide otherwise) concerning:

• Control, management, sale, exchange and acquisition of farming assets (e.g. land, equipment and livestock)
• Entering into farm business tenancies, herbage agreements and other contracts
• Undertaking appropriate planning so that any available tax reliefs, grants and subsidies are not lost
• Paying wages and tax
• Hiring and removing employees
• Managing health and safety issues.

The business attorney(s) may be said to be standing in your shoes.  When making decisions, your business attorney(s) should consider how you would have made the decision, apply the Mental Capacity Act principles to the decision, and act in your best interests when making the decision.  In addition to the LPA you may also wish to consider writing a letter of wishes to make your business attorney aware of your wishes and other information such as:

• What should happen immediately after you lose capacity
• The farm’s future development and expansion
• Sale of the farm.

Although such wishes are not legally binding, an attorney must consider, so far as is reasonably ascertainable, your past and present wishes and feelings (and, in particular, any relevant written statement made by you when you had capacity).

What happens if a farmer loses capacity but has no LPA in place?

If there is no LPA in place and you lose capacity, an application to the Court of Protection for a “deputyship” order can be made. Whilst any views you are able to express should be taken into account in the application, you will not be in control of exactly who is appointed as deputy, as this decision ultimately rests with the Court.  The appointment of a deputy can be a lengthy process and during this time your farm would be at risk from problems such as the bank freezing the farm account, contracts not being fulfilled and, potentially, a loss of confidence from the farming community.

Although the ability to apply to the Court for the appointment of a deputy may provide reassurance that your affairs can still be looked after and managed should you become unable to manage your affairs and not be able to prepare an LPA, we recommend giving serious consideration to preparing LPAs for property and financial affairs (and separately for health and welfare) whilst you can.

If you have any questions about this topic, please get in touch.