Attorneys for an LPA – Doing Nothing is Not a Sensible Option!
Shortly after posting yesterday’s blog, James Watt contacted our office to say that we had got all our facts wrong. James is an Attorney to his brother who has assets of over £1.5M, half in cash and half in shares and collective equity investments.
James explained that he had spoken to his solicitor who had assured him that there was nothing wrong with holding around £750,000 in one bank account, and that as the shares and collective investments had previously been arranged by his brother they should be left as they are. “No need to pay an IFA a fee for advice, old chap, everything is fine as it is!”
I have dealt with several people like James over the years, I recognise that whatever argument you put forward, it will be ignored, because they are right, and you are wrong! So, my stock response these days is – did you get that in writing?
The case of Buckley v The Public Guardian sets out some very useful guidance to attorneys (and presumably deputies) when managing the financial affairs of an individual without mental capacity. Clear guidance was set out by Senior Judge Lush as to the “investment of funds by an attorney”.
Senior Judge Lush made it clear that “there are two common misconceptions when it comes to investments.
1) that attorneys acting under an LPA can do whatever they like with the donor’s funds; and
2) the attorney can do whatever they think the donor could or would have done personally, if they had capacity to manage their own financial affairs.”
Both are incorrect.
The test is not what the donor would have approved or done themselves, but what is in the donor’s best interests. “Best Interests” is a fundamental principal of the Mental Capacity Act 2005 (section 1(5)).
The judge also made clear that the level of care required by the attorney managing the investments should be the same as Trustees whose duties are set out in the Trustee Act 2000.
It is also generally understood that if there are significant assets then the Attorneys must take professional advice from an IFA (see previous blog).
What are the risks to James of carrying on as he seems to think he can?
For starters he has far too much deposited with one bank, the bank deposit guarantee scheme is limited to £85,000 (previously £75,000). Not taking any action to protect this amount of cash would quite rightly be deemed as negligent.
Leaving the investment portfolio as it was organised by the brother is almost certainly incorrect, this would also be deemed negligent (see previous blog).
As an attorney (Trustee) James would be liable in full for any losses for both the cash and the investment portfolio.
Since mid-January 2018 the FTSE 100 index has lost almost 1000 points – are you listening James!
Our firm specialises in providing advice and guidance for Lasting Powers of Attorney, if you require assistance on a professional basis, please feel free to contact us.