Does your Lasting Power of Attorney limit your attorney’s investment options?
We have previously discussed Lasting Powers of Attorney (LPA) but as a general reminder, an LPA is an official legal document allowing you to appoint one or more trusted people, known as attorneys, to make decisions on your behalf if you become unable to do so. There are two types of LPA: health and welfare which covers things like care and medical decisions, and property and financial affairs which covers assets such as bank accounts and bill payments.
The Office of the Public Guardian (OPG) is responsible for monitoring use of LPAs and provides guidance on what LPAs should contain. In September 2015, the OPG published guidance appearing to prevent attorneys from investing the donor’s money in funds that give fund managers discretion to make investments. These are generally called Discretionary Managed Funds. The guidance also appears to prevent funds being left with an investment manager previously appointed by the donor, unless the LPA includes wording which specifically permits this.
This seems to be rather unhelpful guidance and there is currently a dispute as to whether this guidance is correct or not. The guidance refers to banks, but there are other institutions which offer these Discretionary Managed Funds. The use of investment managers who are given discretion is common place nowadays and it is particularly useful for attorneys who need to sell the donor’s house to raise money for care fees. The sale proceeds need to be invested to generate income and capital growth, and the attorney will rely on the investment manager’s expertise to buy and sell the investments without undue delays.
Many LPAs prepared before 2015 will not include the new wording and as a result, the legal and investment communities have been lobbying the OPG to clarify the position or withdraw the reference in the 2015 guidance. Alternatively, they are asking for an easy solution for those who have made LPAs without the wording prior to the guidance being published to update their LPAs.
What is clear is that some investment managers are now refusing to accept instructions from attorneys without specific wording in the LPA. Without the wording, attorneys are left with three options:
- move to another fund manager who will accept instructions (with no certainty one can be found);
- move funds into a standard bank account or investment fund (with likely lower returns); or
- apply to the Court of Protection for specific permission to use a fund manager on a discretionary basis (there is clearly a costs implication for the donor here).
A practical alternative, where the donor still has capacity, is to put in place a new LPA that includes the recommended wording.
Are you affected by this?
If you made an LPA or its predecessor, an Enduring Power of Attorney (EP), before September 2015, it may not include the required wording. If you made an LPA after the 7th September 2015, it should include the wording, but you should still double check just to be sure.
In either case, if you would like your attorneys to be able to instruct a fund manager to help manage your funds on a discretionary basis, or to continue to use your preferred fund manager, you should review your LPA (or EPA) and consider making a new LPA if the required wording is not included.
Ann-Marie Matthews is a solicitor in the private client team at Barker Gotelee, Solicitors in Suffolk.
Suffolk Probate Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email [email protected]
