LPAs and Trusts: How They Work Together

Written by Anthony Dalton · Reviewed by James Tyrrell · Last reviewed 9 April 2026

If you have a Property and Financial Affairs LPA, your attorney can manage your finances if you lose mental capacity. But there is an important boundary that is often overlooked in estate planning: your attorney’s authority only covers assets that are in your name. Assets held within a trust are a different matter entirely.

What Is a Trust?

A trust is a legal arrangement where one party (the trustee) holds assets on behalf of another (the beneficiary). When assets are placed into a trust, they are no longer in the original owner’s personal name — they belong to the trust, and the trustees are responsible for managing them according to the terms of the trust deed.

Trusts are used for a wide range of purposes in estate planning: passing wealth to the next generation in a structured way, protecting assets, managing inheritance tax, or ensuring that specific people benefit from an asset while others receive it eventually.

There are several types of trust that families commonly use in England and Wales:

• Discretionary trusts — The trustees decide how income and capital are distributed among a class of beneficiaries. Used frequently for inheritance tax planning.
• Life interest trusts — One beneficiary (often a surviving spouse) receives income or use of the assets during their lifetime. On their death, the assets pass to the next beneficiaries.
• Protective property trusts — Often created by couples owning property as tenants in common. On the first death, the deceased’s share passes into trust, protecting it from being entirely consumed by care home fees.
• Bare trusts — Assets are held for a named beneficiary who has an absolute entitlement. Often used when transferring assets to children.

The Core Distinction: Personal Assets vs Trust Assets

A Property and Financial Affairs LPA gives the attorney authority to manage the donor’s own financial affairs — their bank accounts, investments, property in their sole name, pension income, bills, and so on. This authority is considerable, but it has a clear boundary.

Assets held in a trust do not belong to the donor personally. They belong to the trust. The trustees manage those assets according to the trust deed, and the LPA attorney has no authority to interfere with that.

This distinction is not always obvious, particularly where a family has set up a trust around a property that the donor still lives in or benefits from. The fact that the donor benefits from a trust — or even helped to create it — does not bring the trust assets within the LPA’s reach.

Example: Split Ownership of a Property

Robert and his wife owned their home as tenants in common, each holding a 50% share. When his wife died, her share passed into a life interest trust under her will, with Robert as the life interest beneficiary. Robert now lives in the house and benefits from his wife’s share — but he does not own it.

Robert later loses capacity. His daughter, who holds his Property and Financial Affairs LPA, can manage Robert’s own 50% share of the property. The trustees of the life interest trust manage the other 50%. The daughter acts as attorney for one half; the trustees act independently for the other. Both roles must be respected.

Can the Attorney Also Be a Trustee?

Yes — and it is quite common, particularly in family situations. The same person might hold the LPA and also be named as a trustee of a family trust. There is nothing legally wrong with this arrangement, but it is important to understand that they are acting in two entirely separate capacities, each with its own duties and legal framework.

As attorney, they act under the authority of the LPA and must follow the principles of the Mental Capacity Act 2005 — always acting in the donor’s best interests. As trustee, they act under the terms of the trust deed and the Trustee Act 1925, with duties to all beneficiaries of the trust.

Conflicts of interest are possible in this dual role. If, for example, a decision about the trust property might benefit the donor at the expense of other trust beneficiaries, the person in both roles needs to be careful. Taking independent legal advice in such situations is sensible.

What Happens if the Donor Is Also a Trustee?

Some donors are not only the person the trust benefits — they are also trustees themselves. If a donor is a trustee of a family trust and later loses mental capacity, the position becomes legally complicated. A person who lacks capacity cannot act as a trustee. Whether the LPA attorney can step in as a replacement trustee, or whether a formal appointment of a new trustee is needed, depends on the terms of the trust deed.

Generally, the Trustee Act 1925 allows for the appointment of a replacement trustee where an existing trustee is unable to act. This is a separate process from the LPA, and it typically requires legal advice to handle correctly.

Why Families Set Up Trusts Alongside LPAs

Trusts and LPAs are not alternatives to each other — they do completely different things. A trust manages how assets are held and who benefits from them, both during life and after death. An LPA manages who makes decisions about the donor’s personal affairs while they are alive but lacking capacity.

Used together as part of a joined-up estate plan, they can offer substantial protection:

• The trust — Protects property, manages inheritance, and may reduce the impact of care home fees on specific assets.
• The LPA — Ensures there is someone with legal authority to manage the donor’s personal finances and make health decisions if capacity is lost.
• Together — The LPA attorney and the trustees each manage what falls within their own remit, with no overlap or confusion.

Practical Implications When Making an LPA

When you set up a Property and Financial Affairs LPA, it is worth being clear — with your attorney and with your solicitor — about exactly which assets fall within the LPA’s scope, and which do not.

If you hold assets in a trust as a beneficiary, your attorney may need to liaise with the trustees on your behalf — for example, to ensure that distributions from the trust are received and managed properly. But the attorney does not manage the trust itself.

If your estate planning includes trusts of any kind, it is particularly important to take legal advice when setting up your LPA. The interaction between trust law and the Mental Capacity Act 2005 has nuances that can catch families out if left unaddressed.

Example: Donor with a Life Interest

Patricia is a beneficiary of a family property trust created when her husband died. She receives income from the trust each year. She also holds significant investments in her own name and has a personal bank account.

Patricia makes a Property and Financial Affairs LPA appointing her son as attorney. If she loses capacity, her son can manage her investments and bank accounts, receive her pension, pay her bills, and — if necessary — deal with the sale of any property she holds personally. He can also, on her behalf, communicate with the trustees of the family property trust and ensure distributions reach her account. But he has no authority to change the terms of the trust or make decisions about the trust assets themselves. The trustees do that.

Common Questions About LPAs and Trusts

This guide was last reviewed and updated on 9 April 2026. Information is based on current legislation and OPG guidance for England and Wales.

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