How to increase the effectiveness of your lasting power of attorney
Three crucial provisions for LPAs
Lasting powers of attorney (LPAs) are vitally important documents: they give someone power to make decisions about your financial affairs, or to make decisions in relation to your personal welfare, after you lose capacity.
LPA forms appointing someone to manage your financial affairs include sections in which the person making the LPA (the donor) can express preferences or give instructions to their attorneys about how they manage the donor’s finances.
There are some important provisions that should be included in your LPA to ensure it is as effective as possible. We look at three of these:
Power for your investments to be subject to discretionary fund management
If you own investments that are managed by brokers or wealth mangers, the likelihood is that these are subject to a discretionary management arrangement, to ensure that the wealth mangers can act as quickly as is required in today’s markets. Discretionary management enables investments to be managed without constant recourse to the investment owner for instructions; instead the wealth managers have full discretion over the portfolio and will report to the owner on performance on a regular basis. However, unless your LPA includes a clause enabling this type of investment management, it will not be possible for your investments to continue to be managed in this way after you have lost capacity. This is because the Office of the Public Guardian, which oversees the operation of LPAs, takes the view that attorneys do not have power to delegate their authority to wealth managers in this way without specific authorisation in the LPA.
If you have an existing LPA which does not include this power you should consider adding it by drawing up a new LPA , and it should be included in new LPAs unless the OPG changes its guidance.
Authorisation for your attorneys to see your Will
The practice has changed in relation to this point in recent years. Previously, it was thought that attorneys had no right to see a donor’s Will because it is confidential to the donor. However, recent guidance issued by the Law Society to solicitors states that your Will should be disclosed to your attorney for financial affairs, unless:
- the solicitor has written to you, informing you that such a request has been made, and you reply, refusing consent; or
- the solicitor holding the Will believes that the attorney is in breach of their obligations towards you under the Mental Capacity Act 2005.
It may be important for your attorneys to be able to see your will to ensure your wishes are honoured. For example, if you have made a specific gift in your will then the gift will fail to take effect if the attorneys sell the item in question during your life on your behalf. In that event, or if your will is outdated for other reasons, your attorneys can apply to the court for another Will to be made on your behalf; this is known as a statutory Will.
Accordingly it is sensible to include guidance in your LPA about whether or not you want your attorneys to be allowed to see your will, especially if you have reservations about this.
Providing for accounts to be prepared and produced to an independent person
Attorneys are under a duty to prepare accounts and to keep the donor’s property separate from their own assets but, unlike a court appointed deputy, there is no obligation for these accounts to be produced for external oversight. Your attorney should be someone that you trust, but this provision includes another layer of control and safety within the LPA. The person to whom the accounts are produced could be a solicitor, accountant or another independent trusted person. If they carry out an audit, and come across any irregularities, appropriate action can be taken rather than matters being left until they come to the OPG’s notice through, for example, your attorneys’ inability to pay your care fees.
The above suggestions are not an exhaustive list and there are a number of other provisions that could be included in your LPA depending on your wishes and personal circumstances. Please call us on 0800 652 8025 or contact us online if you would like to ensure that the provisions of your LPA are as effective as they can be.