Do all attorneys acting under a Lasting Power of Attorney ("LPA") for property and financial affairs know what their duties are; and are they complying with those duties? It can be challenging for attorneys to make sure they do so some useful reminders.
Donors must think carefully when choosing who to appoint as their attorney under an LPA for property and financial affairs. An attorney must be at least 18 and have the skills and ability to carry out the role. Donors often appoint a family member, friend or a professional (such as a solicitor or financial adviser).
So what should attorneys remember? Although it is stating the obvious, an attorney must act within the scope of the powers set out in the LPA. That authority is subject to the Mental Capacity Act 2005 ("MCA") and they must have regard to the associated Code of Practice.
Attorneys have a number of duties which they must comply with, in summary, attorneyshave a duty to carry out the donor's instructions; not to take advantage of their position,not to delegate unless authorised to do so; of good faith; of confidentiality;to comply with directions of the Court of Protection; not to disclaim without notification; tocomply with the relevant guidance; to keep accounts; to keep the donor's money andproperty separate from their own; and to apply certain standards of care and skill.
An attorney under a LPA for property and financial affairs cannot make health, welfare ormedical decisions on behalf of the donor.
An attorney must consider "the principles" set out at section 1 of the MCA. For examplethe donor must be assumed to have capacity unless it is established that he lacks capacity.All practicable steps are to be taken to encourage the donor to make decisions himself.
An attorney has a duty to act in the donor's "best interests". This is fundamental but whatdoes it mean in practice? It can seem onerous and is not defined in the MCA but there is achecklist of factors (set out at section 4) which attorneys should consider. None of thosefactors carries any more weight that another.
Attorneys should remember that best interests is not a test of substituted judgment (iewhat the donor would have wanted) but is instead an objective test. This can be difficultand attorneys can be faced with conflicting choices but all the relevant circumstances mustbe considered.
There can be disagreements with others over what is in the donor's best interests.Attorneys should consult certain people on their views (if practicable and appropriate). Ifthere are differing views (such as with family members or carers), a meeting can be helpfulso everyone can raise their concerns. Ultimately, it is for the attorney to make the decision.Attorneys should be aware that circumstances change and decisions may need to bereviewed to ensure they are still in the donor's best interests.
More than one attorneyRemember that if there is more than one attorney, it is vital to know whether they are actjointly or jointly and severally. If jointly, those attorneys must always act together and allmust sign documents. This can be difficult if one refuses to agree. If attorneys areappointed to act jointly and severally, they can act together or independently. This can beuseful but causes problems if one attorney makes decisions without telling the other.
How should an attorney invest a donor's savings? As a fiduciary, an attorney must exercisesuch care and skill as is reasonable in the circumstances (this duty of care is greater whereattorneys have specialist knowledge). The Office of the Public Guardian has not issuedguidance to attorneys on the investment of funds but Senior Judge Lush said in the recentCourt of Protection case of Re Buckley that attorneys should comply with provisions of theTrustee Act 2000 ie they must:
- have regard to the standard investment criteria ie the suitability of the investments and the need to diversify.
- review the investments from time to time and consider whether they should be varied.
- obtain and consider proper advice about the way in which their investment powers should be exercised.
Additional factors to be considered by an attorney when making investments on behalf of a donor include:
- Whether any major items of expenditure are anticipated or should be planned for
- Whether any gifts or payments to dependants are likely to be made
- The type of return required (high income or capital growth or a mixture)
- The level of acceptable risk
- Whether there is an existing portfolio (if so, the tax and cost considerations that may affect decisions about whether to change it and how quickly)
- If the capital available for investment is over £100,000 and when invested, it will adequately satisfy the donor's current and future income and capital requirements, the interests of the beneficiaries under the donor's Will or intestacy should also be considered
Attorneys must remember to keep the donor's money and property separate from their own. Where possible all investments should be made in the donor's name.
What authority does an attorney have to make gifts of the donor's money? Attorneys' powers to do so are limited.
A gift to charity is permissible (at any time of year), if the donor previously made gifts to that charity or might be expected to make gifts if he had capacity.
Gifts to individuals can only be made on customary occasions (births or birthdays, weddings or wedding anniversaries, civil partnership ceremonies or anniversaries, or any other occasion when friends, families or associates usually give presents) and they can only be made to people who are related to or connected to the donor.
The value of the gift must not be unreasonable having regard to all the circumstances and in particular the size of the donor's estate.
If an attorney wishes to make a gift that is outside the parameters above, such as for tax planning purposes, he must apply to the Court of Protection for permission. The Court will look at the donor's particular circumstances in deciding whether to grant permission. How does an attorney know whether such an application to Court is necessary? The recent Court of Protection decision in Re GM considered gifts made by deputies (but it would be reasonable to regard the guidance as applying equally to attorneys) and indicated that the following tax planning gifts would not require an application to Court for permission.
The annual IHT exemption of £3,000 and the annual small gifts exemption of £250 for up to 10 people, in the following circumstances:
- Where the donor has a life expectancy of less than 5 years
- Where the donor's estate exceeds the nil rate band for IHT
- The gifts are affordable having regard to the donor's care costs and will not adversely affect his standard of care or quality of life
- There is no evidence that the donor would be opposed to gifts of this magnitude being made on their behalf
If an attorney makes unauthorised/ excessive gifts, the Public Guardian may request that the attorney seeks the return of those gifts; or instruct the attorney to apply for retrospective approval (which should not be regarded as a foregone conclusion); or apply to the Court for the removal of the attorney.
Key point to bear in mind
The bottom line is that attorneys must be aware of the law regarding their role and responsibilities.
This article by Jessica Negyal first appeared in the Financial Adviser on 08 August 2013.