Discretionary investment management and Lasting Powers of Attorney
In general, a power of attorney it is a legal document where an individual (known as the ‘Donor’ – the person giving the power) appoints one or more Attorneys (third parties who are authorised to act on behalf of the Donor). The Donor must be over the age of 18 and have mental capacity to enter into any type of power of attorney.
It is important that you understand the differences between each power of attorney and what your options are.
An ordinary power of attorney is usually what comes to mind when you hear the term ‘power of attorney’. It should be distinguished from an Enduring Power of Attorney (“EPA”), or a Lasting Power of Attorney (“LPA”), which are discussed below.
Ordinary POAs are most commonly used in a commercial context, usually in relation to the Donor’s property and affairs, or a specific commercial decision. One example might be a POA for someone to execute documents on the Donor’s behalf, such as during the conveyancing process if the Donor is abroad or otherwise unable to physically sign.
The scope of the attorney’s authority will depend on the provisions of the power itself. Some may be general, allowing the attorney to do anything that the donor could lawfully do themselves. Others may be limited to a specific matter or decision. The power of attorney should make the scope of these powers very clear.
This type of power of attorney must be executed as a deed by the donor and the attorney, while they have the mental capacity to do so, and each in the presence of an independent witness.
The deed should state the date on which it is intended to commence, which can be immediately or a future event. It should also state its duration, or give an end date or event upon which the power ends.
When granting another individual to act on your behalf, consideration should always be given to the trustworthiness of the attorney – you are effectively giving someone the power to act on your behalf, so you should be sure that they will use this privilege properly.
Similarly to an LPA or EPA, there can be more than one attorney appointed on either a joint or joint and several basis.
Apart from the end date specified in the deed, the attorney’s authority will also end in the following circumstances:
In this respect, an ordinary power of attorney differs from EPAs or LPAs, where the attorney’s authority actually begins on the donor’s loss of capacity.
An EPA is a type of power of attorney which enables a person to act on another’s behalf in the event that they have lost the mental capacity to do so themselves. It is created by the donor whilst they have capacity. An EPA relates only to the property and affairs of the donor.
Since 1 October 2007, EPAs have gradually been replaced with LPAs. It was felt that the old EPA regime could leave donors vulnerable to unscrupulous attorneys, due to a lack of regulation and oversight by the Office of the Public Guardian. EPAs can no longer be made but any EPAs which are validly still in force will continue to be so.
An EPA is created in a prescribed form, and gives the attorney(s) named the general authority to deal on the donor’s behalf with all or part of their affairs, or to do specific things. A grant of general authority gives the attorney the power to do anything which the donor could lawfully do themselves, subject to some limitations on making gifts.
An attorney can be any adult individual, you wish, as long as they are not bankrupt. You can also appoint a trust corporation.
An EPA must be signed by both the donor and attorney as a deed, but not necessarily at the same time. Both signatures must be witnessed, and the witnesses must also sign the EPA.
Unlike LPAs, provided that the donor of an EPA has not included a restriction saying that the EPA can only be used when they have lost mental capacity, the EPA can be used by the attorney(s) without it being registered with the Office of the Public Guardian (“OPG”).
This made the EPA much more open to abuse from attorneys who could misuse their position claiming they were managing the affairs of a donor without the same level of validation now required for the LPA.
The EPA must be registered with the OPG as soon as the donor starts to lose mental capacity or has lost capacity. The registration cost is £82 per application from 1 April 2017.
Diva Shah is an Associate in the Private Client team. Diva acts for various clients including high net worth individuals, entrepreneurs, executors, trustees and individuals who lack mental capacity on a broad range of matters.
Phoebe Alexander is currently a trainee solicitor in the Private Client team, where she assists with the administration of trusts and estates, and the drafting of Wills and Lasting Powers of Attorney. Phoebe also assists with Court of Protection matters, including the drafting of Deputyship applications.
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