Lasting Powers of Attorney – Do your attorneys have all the powers they need

It  may often be the case that attorneys acting under either an Enduring Power of Attorney (EPA) or a Lasting Power of Attorney for Property and Financial Affairs (LPA) are required to make financial decisions in respect of the donor (the person who appoints attorneys). Such decisions could well include those of an investment nature which may be best suited to financial professionals who can make better informed decisions by virtue of their specialist knowledge. For instance, an attorney may wish to delegate authority to a discretionary fund manager to manage a donor’s complex investment portfolio.

The position under both EPAs and LPAs is that an attorney cannot usually delegate all or some of their powers to someone else unless they are specifically authorised to do so in the power of attorney itself.

In respect of LPAs, the Office of the Public Guardian has stated in its guidance documentation that specific wording needs to be included in order to permit attorneys to delegate investment management decisions to a discretionary investment manager. Without such specific wording, attorneys cannot use a discretionary management service and can only take advice from specialists operating in this area, meaning they must make the investment decisions themselves as opposed to being able to delegate the authority to do so. It is clear from practice that the same position is being adopted in respect of existing EPAs too.

Unfortunately this is creating problems for those attorneys who are acting under either EPAs or registered LPAs which fail to include such a clause. Many investment fund managers will refuse to act and whether they feel comfortable about this or not, some attorneys are finding themselves having the unenviable task of making often complex investment decisions. Even if the donor does not have an investment portfolio at present, an unexpected lottery win or a substantial inheritance could change circumstances whereby having the instruction would be appropriate.

In an opinion given by independent consultant Caroline Bielanska, she refutes the guidance set by the Office of the Public Guardian, stating there is a strong argument that if the donor has entered into a discretionary fund management contract and subsequently appoints an attorney under an LPA, it is implied that the donor wished the attorney to take over any contract capable of continuing.  However, until the Office of the Public Guardian updates their guidance, it is advisable and best practice to continue to include the instruction within the LPA to avoid costly arguments with discretionary fund managers.

No amendments can be made to an existing EPA whether it is registered or not, or to an LPA, which must be registered before it can be used. If a donor still has mental capacity, they can prepare a new LPA (EPAs can no longer be made) with the specific wording to allow their attorneys to delegate investment decisions to a discretionary fund manager. Of course, the position is more troublesome for those attorneys acting for donors who have already lost capacity and they may decide to apply to the Court of Protection to allow them to engage the services of a discretionary fund manager. Such an application is expensive and can take many months, during which time successful investment opportunities may have been missed.

The complex nature of the law surrounding LPAs highlights the need for those considering putting in place LPAs to take appropriate legal advice beforehand.

If you require any further information or advice or wish to discuss making LPAs, please contact a member of our team today.