From EPA to LPA: The people who'll take the baton if you can't carry on

Don't leave it too late to decide who will manage your financial affairs when you can no longer do so

If you're in good health and of sound mind, it's hard to imagine a time in your life when you will no longer be able to manage your own affairs. But at some point in the future, illness, disability or mental impairment may stop you from handling even a bank account.

If you lose your mental capacity and haven't arranged for anyone to act for you, your assets will in effect be frozen. Your family will then have to make an application to the Court of Protection (which holds your funds in the meantime) to be appointed as receivers to handle your affairs - often a lengthy and costly procedure.

A far better option is to choose a friend, relative or professional as an attorney. This is someone you choose (while you still have the mental capacity) to make decisions about your finances. Should it become necessary, he or she will hold an "enduring power" (EPA) on your behalf.

An EPA is "like an insurance policy, where you hope it never happens", says Anne Lewis, partner at solicitors Cripps Harries Hall. But, she adds, it can make things far simpler than having to go through the Court of Protection. "There is a lot of bureaucracy involved, and the court can then be actively involved in the person's affairs from then on."

At present, if you make an EPA and later lose the capacity to manage your affairs, your attorney must at that stage apply to register the EPA with the Public Guardianship Office, the administrative arm of the Court of Protection.

The attorney must also notify you and specified family members of the intention to register, giving those concerned the opportunity to object. If there are no objections, the EPA will be registered in a matter of weeks.

However, EPAs will change as a result of the Mental Capacity Act, which comes into force later this year and covers England and Wales. A new arrangement called a Lasting Power of Attorney will be introduced, and will take two forms.

The first will be a finance and property LPA, which will be similar to the existing EPA; the second will be a completely new LPA for health and personal welfare. The latter will give powers to attorneys to make decisions on matters such as medical treatment and how the person's day-to-day care is to be managed.

Different attorneys can be appointed for different LPAs.

The Act was originally due to be introduced in April, but while some elements will be brought in then, the launch date for LPAs has now been postponed until October. At this point, they will replace EPAs; any EPAs made before then will still be valid.

The new rules aim to create a more comprehensive regime for looking after the overall affairs of an individual. But there is concern that they will also add another layer of complexity.

Ms Lewis warns: "There will be ... much greater expense at the outset because of the requirement to register the LPA with the Public Guardianship Office before it can be used. This could double or treble the cost."

At present, you can set up an ordinary power of attorney at any time - if, say, you are spending a long spell abroad. But you would register it as an EPA only when, or if, you felt you could no longer control all your affairs yourself.

There are further concerns that LPAs could remove a safeguard provided by EPAs. Registration of an EPA at the appropriate time notifies the person's bank, for example, that they are no longer able to deal with their finances. But with an LPA, there is no obligation to notify anyone. This, it is feared, could leave LPAs open to abuse.

Some advisers are urging people to act now to safeguard their property and financial affairs for the future before this year's changes take place. "There is nothing to lose by setting up an EPA now," says Ms Lewis. "This will not prevent you from completing a health LPA at a later date."

However, the reaction to the changes from charities working on behalf of the elderly or mentally ill has been mainly positive. "We would have liked the regulations to be more rigorous to ensure the new powers are not open to abuse," says Jean Gould, legal officer at Help the Aged. "But on the whole, this is a very good development and one that we favour."

It is usually simple to prepare and operate an EPA. You can get a form online from www. guardianship.gov.uk or from legal stationers or solicitors.

You have complete freedom in your choice of attorneys and, as a safeguard, you can if you wish appoint more than one.

"Relatives are the most popular choice," says Ms Lewis. "Some people choose a close friend, but it is a major job to give to someone. Some people like to appoint both a family member and a professional as a check and balance to ensure things are done properly."

You can add conditions to the EPA, too - for example, requiring the attorney to provide annual accounts to an independent body, such as a firm of solicitors.