Lasting Powers of Attorney and discretionary investment management

Having a Lasting Power of Attorney (LPA) in place for your financial decisions, which includes management of your investments, is vitally important to protect you and your loved ones in the future. Ashley Partridge, Partner in our Wills, Probate and Estate Planning department, explains more here about the upcoming change to this rule and how to ensure there are no difficulties in the future.

What decisions can be made under a financial LPA?

There are two different LPAs available to you; a financial decisions LPA or health and welfare LPA.  Both documents are designed to allow you as the “donor” to appoint a person you trust to make decisions on your behalf should you lose mental capacity in the future.  This could be if you develop dementia, have a life changing incident that leaves you with head or brain injuries, you suffer a stroke or, as we have seen in recent years, contract Covid-19 or suffer from Long Covid.  Without an LPA in place, to be able to manage your affairs on your behalf, your loved ones would be required to apply to the Court of Protection to become a Deputy; a long, expensive and complicated process which can be avoided with an LPA.

A financial decisions LPA would allow you to appoint an attorney to make the following decisions on your behalf:

• Opening and closing bank accounts
• The payment of bills and day to day financial arrangements
• Withdrawal of cash
• Buying or selling property
• Making or selling investments

How have discretionary investments been managed in LPAs?

Due to the fast paced nature of making investments, it is common for an investment manager to run a portfolio on a discretionary basis, allowing them to make day to day decisions and report back to their client regularly opposed to obtaining instructions from them whenever a change is needed.

While investment management falls under the remit of an attorney under a financial decisions LPA, this is skilled and time consuming work and it is logical that the investment manager should continue their role should the LPA be required in the future.

In 2015, the Office of the Public Guardian (OPG) issued new guidance stating that there had to be an express term written within the LPA to this effect, restricting the attorney being able to delegate this to a third party if this clause was absent.  Without this clause, the investment manager is not permitted to run the portfolio, meaning that this responsibility falls to the attorney who may not have the appropriate experience, expertise, resources or inclination to do so. This leaves the donor open to risks as well as valuable opportunities being missed or mismanaged.

When this requirement was introduced in 2015, it also applied to LPAs already registered.  Many LPAs did not include this clause as it was not standard practice.  In the event that the donor still had capacity, they could have re-drafted the LPA at that time, however for some this was not the case and so a lengthy application to the Court of Protection needed to be made.

The OPG have recently confirmed that they will revise this guidance so that the clause will no longer be required in a financial decisions LPA, removing the burden that this has caused over the years for donors, attorneys and investment managers alike, and making investment management simpler for attorneys in the future. That said, it is certainly our advice for this clause to continue to be included in all new financial LPAs being created until the new OPG guidance has been issued.

Can I apply for an LPA online?

It is possible for individuals to set up their own LPA using online facilities, however this is a prime example of how so-called DIY LPAs can leave a person exposed to risk when there isn’t the adequate knowledge of the intricacies involved.  The input of experienced legal advisors to guide you through this complex area of law can help you understand your options and requirements regarding:

• Choosing the right attorneys and how you wish decisions to be made between them if you choose more than one.
• How to ensure your LPA is valid, is executed properly and has the correct witness signatures.
• Having the appropriate certification from an independent party.
• Clear, unambiguous wording of the document.
• Whether there are additional clauses that should be included to protect your investments, your business or other assets within your life.

The OPG’s recent announcement is a welcome change and also a timely reminder of the importance of having an LPA in place, either for financial decisions, for health and welfare decisions, or both.

To discuss writing, updating or reviewing your LPA, you can contact Ashley or a member of the Wills, Probate and Estate Planning team on 01264 400 500.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.