08/10/2026
Business Owners: You Have a Plan for Your Business If You Die. But What If You Lose Mental Capacity?
One of the biggest risks to your family's financial security and your business's future could be something you have never properly planned for.
As a business owner, you probably spend considerable time planning for the future.
You think about growing your business, protecting your assets, reducing your tax liabilities, providing for your family and ensuring that the wealth you have worked hard to build is passed on to the right people.
You may have a will, life insurance, shareholder agreements and a succession plan. You might have considered what would happen to your business if you retired, sold it or passed away.
But there is another scenario that deserves your attention.
What would happen if you were still alive but suddenly lost the mental capacity to make decisions for yourself?
An accident, a stroke, a serious illness or a condition affecting your cognitive abilities could leave you unable to manage your finances or make important personal decisions.
Your business might still be trading. Your employees might still need paying. Your mortgage and other financial commitments would continue. Your family might still depend on your income.
Yet you could be unable to make the decisions you normally take for granted.
Who would have the legal authority to manage your personal financial affairs? Who would make decisions about your care? And would your business have the arrangements necessary to continue operating?
These are not questions you want your family, business partners or employees trying to answer during a crisis.
One important part of the solution is a Lasting Power of Attorney (LPA).
What Is a Lasting Power of Attorney?
A Lasting Power of Attorney is a legal document that allows you to appoint one or more trusted people, known as attorneys, to make decisions on your behalf within the authority granted by the document.
The person making the LPA is called the donor.
The people appointed to act on their behalf are called attorneys. They do not have to be solicitors. They can be trusted family members, friends or other suitable individuals.
An LPA allows you to decide in advance who you want to make certain decisions for you if you become unable to make those decisions yourself.
The key point is that you must have the necessary mental capacity to make an LPA when you create it.
If you lose capacity without having suitable arrangements in place, your family cannot simply assume they have the legal authority to take over your affairs.
Being your spouse, partner, son, daughter or closest friend does not automatically give someone authority to manage all your financial affairs or make every decision about your health and care.
An LPA provides a formal legal framework for dealing with these circumstances.
There are two types of LPA in England and Wales:
Property and Financial Affairs LPA.
Health and Welfare LPA.
They cover different areas of your life and can work alongside one another to provide more comprehensive protection.
1. Property and Financial Affairs LPA: Protecting Your Financial Affairs
For business owners, a Property and Financial Affairs LPA can be an important part of protecting their personal financial position.
It allows your appointed attorneys to manage your property and financial affairs within the scope of the authority granted.
Depending on your circumstances, this can include:
Operating bank and building society accounts.
Paying household bills and other financial commitments.
Managing investments.
Buying or selling property.
Dealing with mortgages and other financial arrangements.
Managing income, pensions and benefits.
Handling relevant personal financial matters connected with your business interests, where the authority granted and applicable arrangements permit it.
The LPA must be registered with the Office of the Public Guardian (OPG) before it can be used.
You can specify whether your attorneys may act once the LPA is registered, with your permission, or only when you lack the mental capacity to make the relevant decisions yourself.
This flexibility can be useful if you want someone to help with financial administration while you retain capacity, perhaps because a physical disability or illness makes managing your affairs more difficult.
Your attorneys must act within the authority provided by the document and comply with their legal responsibilities.
What happens without a Property and Financial Affairs LPA?
Imagine you are a successful business owner in your fifties.
You have a family home, personal investments, a business, employees, suppliers and financial commitments.
Following a serious accident, you lose the mental capacity to manage your finances.
Your spouse understands how the household operates. Your business partner knows the company. Your children understand your wishes.
But knowing what you would want and having the legal authority to carry it out are two different things.
Without appropriate authority, your family may encounter difficulties dealing with financial institutions, accessing funds or managing assets on your behalf.
The consequences will depend on the assets involved, the arrangements already in place and the policies of the relevant institutions.
For example, a bank may restrict access to an account if it determines that the account holder lacks capacity and there is no appropriate authority in place.
Joint bank accounts require particular care. They are not automatically frozen in every situation, but a bank may restrict transactions or take other action depending on its terms, policies and the circumstances.
Likewise, a spouse cannot automatically sign a new mortgage or remortgage an asset solely because they are married to the person who has lost capacity.
The same principle applies to selling property, accessing investments and managing certain financial commitments.
Without the appropriate authority, your family could face:
Delays in accessing money needed to meet financial commitments.
Difficulties arranging or changing mortgage facilities.
Delays in selling property or investments.
Additional legal costs.
Uncertainty over who can manage your financial affairs.
Disruption to household finances.
If no suitable LPA exists, an application to the Court of Protection for a deputyship order may be necessary to obtain authority to manage certain financial affairs.
That process can involve additional time, expense and ongoing responsibilities.
Your family could understand your wishes perfectly and still be unable to carry them out without the necessary legal authority.
An important distinction for business owners:
A Property and Financial Affairs LPA does not automatically give an attorney control of your limited company.
Your personal financial affairs and your company's legal affairs are separate.
For example, if you are a company director, your personal LPA does not automatically transfer your directorship or allow your attorney to exercise every power you hold as a director.
Likewise, being appointed as your attorney does not automatically give someone unrestricted access to company bank accounts or authority to make decisions on behalf of the company.
Your company's articles of association, shareholder agreements, banking mandates, existing delegations and other relevant arrangements may all affect what happens if you become unable to act.
This is why business continuity planning should be considered alongside personal LPAs.
The objective is to establish both who can manage your personal affairs and how your business can continue operating if you are suddenly unavailable.
2. Health and Welfare LPA: Protecting Your Personal Choices
The second type of LPA deals with decisions about your health, care and personal welfare.
While a Property and Financial Affairs LPA focuses on your finances and property, a Health and Welfare LPA allows your appointed attorneys to make certain decisions about how you are cared for if you lack the mental capacity to make the relevant decisions yourself.
Depending on the authority granted, these decisions can include:
Your daily routine and personal care.
Where you live and whether you need residential care.
Decisions about medical treatment.
Your diet and other aspects of daily living.
Certain decisions about life-sustaining treatment.
If you want your attorneys to have authority to make decisions about life-sustaining treatment, you must expressly grant that authority in the LPA.
A Health and Welfare LPA can only be used when you lack the mental capacity to make the particular decision yourself.
It does not give your attorneys a general right to control your life or override decisions you are capable of making.
The Mental Capacity Act 2005 establishes important safeguards to protect people who may lack capacity.
Decision-makers must presume that a person has capacity unless it is established otherwise, take practical steps to help them make their own decisions and avoid treating someone as incapable simply because they make an unwise decision.
Attorneys must act in the person's best interests and consider the least restrictive appropriate option.
What happens without a Health and Welfare LPA?
Imagine you suffer a serious stroke and become unable to make certain medical or care decisions.
Your spouse knows your values. Your children understand your preferences. You may have discussed what matters most to you, including where you would want to receive care and your views about particular treatments.
However, your family does not automatically acquire the legal authority to make every decision on your behalf.
Healthcare professionals must follow the applicable legal framework and consider your capacity, any valid advance decisions, any relevant LPA and the circumstances of the decision.
Without a Health and Welfare LPA, decisions that you cannot make yourself will generally need to be made through the applicable best-interests decision-making process.
Healthcare professionals must take account of your wishes, feelings, beliefs and values, and consult appropriate people where required.
In some circumstances, a serious disagreement or a decision that cannot be resolved through the ordinary process may require an application to the Court of Protection.
This can create uncertainty and additional costs at an already difficult time.
Without an LPA, you also lose the opportunity to appoint the person you want to make relevant health and welfare decisions on your behalf.
A Health and Welfare LPA gives you the opportunity to choose who should speak for you when you cannot speak for yourself.
It allows you to appoint people who understand your values and to record relevant preferences and instructions.
It cannot guarantee that every decision will be made exactly as you would wish, but it establishes a formal mechanism for your chosen attorneys to participate in decisions within their legal authority.
Why Business Owners Should Take LPAs Seriously:
Many business owners associate LPAs with old age.
That is a mistake.
A loss of mental capacity can happen at any age through an accident, a sudden illness or another medical event.
For business owners, the consequences can extend beyond their personal finances.
Consider the role you play in your business.
You might approve significant payments, manage banking relationships, negotiate contracts, maintain relationships with key clients and make strategic decisions.
You might be the person who understands the company's finances, knows its major suppliers and makes decisions about future investment.
If you suddenly become unable to perform those functions, your business may need to rely on other directors, existing delegations, banking mandates, shareholder agreements and its constitutional documents.
If those arrangements have not been considered carefully, disruption may follow.
However, it is important to distinguish between two separate areas of planning.
Personal protection: Who has legal authority to manage your personal finances and make relevant health and welfare decisions if you lose capacity?
Business continuity: What arrangements allow your company or business to continue operating if you cannot perform your usual role?
An LPA helps address the first issue. It does not automatically resolve the second.
The appropriate business arrangements will depend on your business structure, your role and the documents already in place.
A sole trader, a partner in a partnership, a shareholder in a limited company and a director may all face different considerations.
Depending on the circumstances, you may need to review:
Your Property and Financial Affairs LPA.
Your Health and Welfare LPA.
Your company's articles of association.
Your shareholder or partnership agreement.
Your company's banking arrangements and delegated authorities.
Your succession and business continuity plans.
Your arrangements for managing key relationships and responsibilities.
These documents and arrangements should work together rather than be treated as interchangeable.
The aim is to reduce uncertainty and ensure that the appropriate people can take the appropriate actions when required.
The Mental Capacity Act 2005: The Legal Framework
LPAs operate within the framework established by the Mental Capacity Act 2005 in England and Wales.
The Act provides the legal basis for assessing mental capacity and making decisions for people who lack the capacity to make particular decisions themselves.
It also introduced LPAs, allowing individuals to appoint attorneys in advance.
The Act is based on five fundamental principles.
1. Presume capacity.
A person must be assumed to have capacity unless it is established that they lack it.
2. Support decision-making.
All practicable steps must be taken to help a person make their own decision before concluding that they cannot.
3. Respect individual choice.
A person must not be treated as unable to make a decision simply because they make an unwise one.
4. Act in the person's best interests.
Decisions made on behalf of someone who lacks capacity must be made in their best interests, taking account of the relevant circumstances.
5. Choose the least restrictive option.
Decision-makers must consider whether the desired outcome can be achieved in a way that interferes less with the person's rights and freedom.
These principles govern how attorneys exercise their authority.
The Office of the Public Guardian has responsibilities relating to the registration of LPAs and the supervision of attorneys. It can investigate concerns about an attorney's conduct and take appropriate action where necessary.
An LPA is therefore not a blank cheque. It is a formal legal arrangement that gives defined authority while imposing responsibilities and safeguards.
What About an Enduring Power of Attorney?
You may already have an Enduring Power of Attorney (EPA).
EPAs were the predecessor to LPAs and were replaced for new arrangements in October 2007.
However, an existing, valid EPA can still be legally effective.
An EPA covers property and financial affairs, not health and welfare decisions.
It also operates under different rules from an LPA.
For example, an EPA must be registered with the Office of the Public Guardian when the donor is or is becoming mentally incapable of managing their affairs. An LPA, by contrast, must be registered before it can be used, even if the donor still has capacity.
The distinction matters because an existing EPA may continue to meet some of your needs, but it does not provide the same scope of protection as having both types of LPA.
If you already have an EPA, it is worth reviewing whether it remains appropriate for your circumstances and whether additional arrangements are needed.
You should not assume that an EPA is invalid simply because it is old. Equally, you should not assume that it covers every eventuality.
Choosing Your Attorneys: A Decision That Deserves Careful Thought
Making an LPA is not simply about completing a form.
It is about deciding who you trust to act on your behalf.
Your attorneys should be people who understand your wishes, can make responsible decisions and are prepared to take on the obligations involved.
You can appoint more than one attorney and decide how they should act.
For example, you can appoint attorneys to act jointly on all decisions or jointly and severally, allowing them to act independently within the authority granted.
The right arrangement depends on your circumstances.
You should also consider whether to appoint replacement attorneys in case one of your original choices cannot or no longer wishes to act.
For business owners, it is worth considering whether the people best placed to manage your personal finances are also the right people to make decisions about your health and welfare.
Your choice should reflect your personal circumstances, family relationships and financial affairs.
It is also important to understand that attorneys have legal duties. They must act within their authority, follow the relevant principles of the Mental Capacity Act and act in your best interests when making decisions on your behalf.
Choosing someone you trust is essential, but so is ensuring that they understand the responsibilities they are accepting.
When Should You Put an LPA in Place?
The answer is simple: while you have the mental capacity to make one.
You cannot wait until you have lost the relevant mental capacity and then create an LPA to solve the problem.
Once an LPA has been properly completed, it must be registered with the Office of the Public Guardian before it can be used.
Registration takes time, and applications can be delayed by errors or objections.
Waiting until an emergency occurs may leave you without the arrangements you need when they matter most.
If you already have LPAs, review them periodically, particularly following a significant change in your family circumstances, business structure, financial position or choice of trusted attorneys.
You can find official guidance on making and registering an LPA through the government's Lasting Power of Attorney service.
If your affairs are complex, professional advice can help you ensure that your LPAs fit appropriately alongside your wider estate planning and business continuity arrangements.
A Final Thought for Business Owners:
We insure our businesses, protect our buildings, insure our lives, plan our retirement and think carefully about what happens to our wealth when we die.
But there is a gap in that planning when we consider what happens if we are alive but unable to make decisions for ourselves.
A will deals with what happens to your estate after death.
An LPA deals with a different problem: who can make certain decisions for you during your lifetime if you lose the capacity to make them yourself.
Neither replaces the other.
And neither should be mistaken for a complete business continuity plan.
For business owners, these distinctions matter because personal finances, family responsibilities and business interests are often closely connected.
Without appropriate arrangements, the people closest to you may face avoidable uncertainty, delays and legal complications at precisely the moment they are least equipped to deal with them.
Putting the right LPAs in place is a practical step towards protecting your family, preserving your choices and reducing the risk of unnecessary disruption.
It is not about expecting the worst.
It is about recognising that life does not always follow the plan.
If you are a business owner, ask yourself one question: if you could no longer make decisions tomorrow, have you put the right legal authority in place for the people you trust?
If the answer is no, it may be time to review your arrangements.
Because protecting your family and your future is not just about what happens when you die.
It is also about what happens if you are still here but can no longer make the decisions that matter.
