As an attorney under a Lasting Power of Attorney (LPA) for Finance and Property, you may be tasked with making investments on behalf of the donor. It may be that you happen to be a seasoned professional at investing but, most attorneys won’t be. This article looks at discretionary investments and power of attorney and what the attorney can and can’t do.
In 2015, the Office of the Public Guardian (OPG) published guidance that required specific wording to be incorporated into an LPA for Finance and Property. This was to allow the attorney to use a ‘discretionary investment manager’ to assist in managing financial investments. If the wording wasn’t in the LPA, the attorney could not use the services of an investment manager.
This was not commonly known so, there were many LPAs that did not have the wording in. If the donor still had capacity then they could simply make the change themselves. If they had lost mental capacity, however, the attorney would have to make an application to the Court of Protection.
Suggested wording
The suggested wording is:
My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investment in a discrretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees’.
Improved guidance from the OPG
This was of a major concern but, fortunately in March 2022, the OPG agreed to change its guidance for discretionary investments and power of attorney so the wording would no longer be needed. An organisation called The Society of Trust and Estate Practitioners Limited or STEP had been campaiging for the change. It appears though, that it is not that simple. Some financial institutions have stated that as far as they are concerned if the donor losses capacity, they can no longer act for them. This includes through an attorney and even if there was an existing agreement in place.
“In circumstances where you already have investments that are managed on your behalf by an investment professional (known as discretionary investment management), or would like to allow your attorneys to use any scheme involving discretionary investment management, you should consider taking legal advice on whether it is necessary to make specific provision for this in your LPA
This is because at least one major financial institution has taken the position that existing contracts relating to discretionary investment management schemes will come to an end on the loss of capacity of the donor of an LPA, and that any new investments by attorneys in discretionary investment management schemes will only be permitted if there is an express instruction on the matter in the LPA.”
So, the current advice appears to be, seek legal advice or put the wording in there anyway.
