Power of Attorney and managed investments – why it pays to get professional help

Since being introduced in 2007 it has become apparent that the Lasting Power of Attorney (Successor to the Enduring Power of Attorney) is an important document to assist in the management of an individual’s financial affairs and medical needs.

However, a part of the Lasting Power of Attorney (LPA) that is often overlooked is Section 7: Preferences and Instructions.  Using this section, the Donor of the power can communicate to their Attorneys details of things they would like them to do, i.e. preferences, or things they must do, i.e. instructions.  By way of an example, a preference may be that the Donor wishes to remain at home and receive domiciliary care; this is something that they would like to happen, but which may not be achievable if their care needs are very severe.  An instruction may be that the Attorney must prepare a set of accounts annually; this is something that an Attorney can do, and will be in breach of their duties if they fail to do so.

Some care must be taken when wording Preferences and Instructions.  If the Office of the Public Guardian feels that the directions given are too restrictive or incompatible with the powers granted by the LPA, they may refuse to register the document until the problematic clause has been removed.

Managing investments

One particularly common instruction, and one that is essential for any Property and Affairs LPA, is the clause that allows Attorneys to invest the Donor’s assets with a discretionary fund manager, or to continue where such an arrangement is already in place, as opposed to investments that would be managed by the Attorney personally.

It is usual for funds to be invested such a scheme, allowing an Independent Financial Adviser to act quickly on behalf of an investor to buy or sell shares subject to the whims of the market.  However, as this would essentially represent an Attorney delegating their powers, the LPA does not authorise investment in this type of arrangement without additional wording.  Where this wording does not appear, it may be that the fund manager will not accept the LPA, and an Attorney does not have the full range of powers available to ensure that they are able to act in the Donor’s best interests and secure the best return on their investments. This could be critical if there is a downturn in the stock markets or investment trends, which potentially offer greater returns start to evolve and you find yourself powerless to act. In particular, it is quite likely that the risk level selected for a person’s investment portfolios might need to change or at least be reviewed once they reach the point of not having capacity.

A Donor should be mindful of this and review their LPAs to ensure that they are fit for purpose; if amendments need to be made it will be far easier to achieve this while the Donor has mental capacity, and before the LPA is needed.

These hidden aspects of preparing a Lasting Power of Attorney can easily catch out those who are not aware and is one of the reasons why it pays to have LPAs prepared by a qualified lawyer.

Please call us on 020 8464 4242 for our Bromley office or 020 7481 2422 for our London office to talk to a qualified professional who can help you with your Powers of Attorney.