All change, again – Lasting Powers of Attorney and discretionary management of investments

Julie Man, Partner in the Russell-Cooke Solicitors, private client team.
Julie Man
3 min Read

Lasting Powers of Attorney (LPAs) enable people to choose who they trust to make decisions over their finances or over their health and welfare when they are no longer able to do so.

Over the last few years, particularly with the pandemic, the spotlight has been shone on LPAs and the value of having one. It has brought about more awareness of their importance, not just for the elderly but for anyone in the event of an unfortunate change in their ability to make decisions.

The importance of having an LPA was highlighted in the moving documentary, ‘Finding Derek’, when television personality Kate Garraway gave a real and moving insight into her personal and family struggles in not being able to access her husband’s finances, due to him not having an LPA. This drove home the importance of having an LPA when needing to access bank accounts, paying bills, selling investments or property.

Discretionary management schemes

Some will recall with dismay back in 2015 when the Office of the Public Guardian (OPG) changed its stance regarding an attorney’s ability to invest in discretionary management schemes, or continue to do so, once a person lost capacity.

The OPG decided that an LPA must include an express provision which allowed their attorney's power to continue to hold, or to invest in, investments managed on a discretionary basis.

In reality many financial LPAs before 2015 simply did not include this express provision. Many therefore had to change their existing LPAs and put in place new ones to include this. Likewise, those putting in place an LPA needed to be aware of this, which was an unrealistic expectation.

So if the LPA did not have this clause, what did it mean? It meant a person’s investment manager did not have the power to manage an investment portfolio on a ‘discretionary’ basis.

When faced with this scenario many attorneys and families found themselves in the unfortunate position of having to embark upon a worrying, time-consuming and expensive application to the Court of Protection for authority to do so, or worse to rubber stamp an arrangement the donor already had in place before they lost capacity.

The OPG has confirmed that there is no longer the need for this express provision in LPAs. This is a long overdue U-turn from the OPG, providing clarity many have been waiting and hoping for. It is a positive and welcome step for those taking on the task of managing the finances of a loved one at what is often, a difficult time, by taking away additional expense and unwanted bureaucracy.

However, we would recommend proceeding with caution, as the news simply puts us back in the position we originally were in before 2015. There is no guarantee the OPG will not change its mind again.

Following discussions with practitioners, including members of the Law Society’s Mental Health and Disability Committee and Wills and Equity Committee, the OPG has agreed to review and revise its position.

The OPG is committed to changing its guidance to ensure an attorney can manage funds via a DMF without the express permission of the court.

Briefings Individuals & families