Power of Attorney can only legally be made when the donor has full mental capacity to enact and consent to the document. It is possible for people with dementia to still have mental capacity and complete their Lasting Power of Attorney forms. If a person with dementia has lost mental capacity - which means they cannot understand the information needed to make decisions, retain the information and/or utilise the information to make decisions - they cannot create an LPA.
A Health and Welfare Power of Attorney only comes into effect once the donor has lost mental capacity. Whereas a Property and Finance Power of Attorney can come into effect after it is submitted or when the donor loses mental capacity - depending on what the donor choses when they fill out the forms.