Lasting Power of Attorney with Discretionary Fund Management

Other than writing a Will, writing a Lasting Power of Attorney (LPA) is one of the key pillars with regard to personal financial planning. An LPA allows an individual to appoint one or more attorneys to act on their behalf in the event of incapacity. Attorneys are often family members, but may be trusted friends or professionals, such as a solicitor.

An attorney has to act as though they were the donor of the LPA, so as to act in the donor’s best interests. As such, unless the LPA specifically gives an attorney the power to delegate investment decisions, only the attorney can make decisions under the law and they cannot be delegated.

As an investment manager, this means that if we are managing a portfolio for a client and the client loses capacity with the result of attorneys stepping in under an LPA, we can only continue to act as investment manager if the LPA gives the attorneys the necessary power to delegate investment decisions. Typical wording in the LPA might be as follows:

‘My attorney(s) may transfer my investments into a discretionary management scheme, even though this means that investment decisions will be made by the managers of the scheme and my investments will be held in the name of the managers of the scheme or their nominees.  Alternatively, where prior to my loss of mental capacity to make financial decisions, I already had my investments managed in a discretionary management scheme, I want the discretionary management scheme to continue, even though this means that investment decisions will be made by the managers of the scheme and my investments will be held in the name of the managers of the scheme or their nominees.’

In the case of a new client, we would always encourage a client to review their LPA to ensure it contains the necessary wording as above. In this way, in the event of incapacity, we could continue to act as their investment manager and operate discretionary fund management.

A client can only make a new LPA whilst they have mental capacity, otherwise a Court of Protection Order would be required; this can be expensive and take time.

Please note, this does not constitute investment advice and we do not give tax advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch – telephone 01392 875500 info@SeabrookClark.co.uk

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