Acting as a financial attorney– your questions answered
The law allows us to appoint one or more people (known as attorneys) to make financial decisions for us should we lose the capacity to make those decisions for ourselves. Here, Stephen Horscroft, a solicitor at Cripps Pemberton Greenish, outlines some of the common questions he gets asked by attorneys.
During Dementia Awareness Week last month, there was a renewed focus on the importance of appointing trusted attorneys to assist with financial matters in the event of a loss of capacity. Powers of Attorney are an important part of planning for the future and should be considered as early as possible, but especially following a diagnosis of dementia.
Acting as an attorney can be hard work. Attorneys under Lasting Powers of Attorney (“LPAs”) (or the previous versions – Enduring Powers of Attorney (“EPAs”)) must be aware of their duties and the principles they must apply when making decisions. Ignorance of the law is no defence.
These are some of the questions we are commonly asked by attorneys:
When can I act?
This will depend on whether the person who appointed you (known as the donor) signed an EPA or a LPA.
Although EPAs can no longer be created or amended, they remain valid and usually allow you to act immediately. If the donor is losing, or has lost capacity to manage their finances then your authority is limited until the EPA is registered with the Office of the Public Guardian (“OPG”).
By contrast, a LPA, once signed, must be registered with the OPG before it can be used. This may have been done when the LPA was set up, regardless of the donor’s age or capacity, as registration takes several months. Generally, financial LPAs can be used immediately after registration even while the donor still has capacity.
What are my duties?
If the donor has lost capacity to make their own decisions, you can manage their finances and make any decisions that they cannot make for themselves. This includes paying bills, operating bank accounts, making investment decisions and even selling their property.
How do I know if the donor lacks capacity?
This is a difficult question because capacity can fluctuate. The law says that the donor lacks capacity if they are unable to make a decision because of an impairment with the functioning of their mind. They are unable to make a decision if they cannot understand, retain or weigh the necessary information.
The ability to make decisions is both time and issue specific. The donor may have capacity to make a simple decision about, for example, paying a bill but not a complex investment decision.
What principles should I follow?
You should assume that the donor is capable of making a decision unless shown otherwise and you should take all practical steps to help them come to the decision for themselves. Just because they are making an unwise or eccentric decision does not necessarily mean that they do not have capacity to make it. All decisions must be made in their best interests and in the way which is least restrictive to their rights and freedoms.
You should take account of any past wishes and feelings of which you are aware. You should keep records of how you reached your decisions in case you are challenged in the future.
How should I make investment decisions?
It is important to obtain and have regard to proper advice, ideally from a qualified financial adviser. You are required to review the suitability of investments (and vary them as appropriate), to diversify and to keep the donor’s assets separate from your own.
Can I make gifts from the donor’s assets?
There are strict limits on gifts you can make on the donor’s behalf. Generally, it is possible to make gifts on customary occasions (such as birthdays) to related or connected people provided that these gifts are reasonable, given the size of their estate. Any larger gifts or arrangements in which you have a close financial interest must be authorised by the Court of Protection. If in doubt you should obtain legal advice first.
If you have any queries regarding your role as an attorney or would like a copy of our attorney guides please contact me at email@example.com or on 01892 506341.
This article first appeared in Kent Life.