In the case of Re Buckley (22 January 2013 – unreported), Senior Judge Lush could simply have granted an application by the Public Guardian to revoke a Lasting Power of Attorney and cancel the registration in light of concerns about the conduct of the sole attorney, who was the donor’s niece. She had put nearly £90,000 into a reptile breeding venture (which may or may not have included snakes) and took nearly £45,000 of her aunt’s capital for her own benefit.
It goes without saying that attorneys and deputies appointed to deal with the donor’s property and financial affairs have a lot of power. However, you know the saying ‘with great power comes great responsibility’, and rightly so. So what are the responsibilities of deputies and attorneys, when investing funds on behalf of the donor?
Responsibilities of deputies and attorneys
Happily, this case provided SJ Lush the opportunity to spell things out in much more detail. He first pointed out two common misconceptions when it comes to investments:
- Attorneys can do whatever they like with the donor’s funds; and
- Attorneys can do whatever the donors could or would have done personally, if they had the capacity to do so.
That, of course, is not true. As we know, the attorney or deputy must act in the best interests of the donor, and in doing so, must follow the Core Principles and the Code of Practice under the Mental Capacity Act 2005. Yet, research found that not many attorneys see what they are doing as abusive, and will try to justify decisions by claiming that the donor would have wanted it. Even if that may be true, an attorney or deputy needs to understand their role as a fiduciary and the risk to their position if they were to act in conflict with those duties.
The Trustee Act 2000 places a duty of care on all Trustees, including attorneys, Court of Protection deputies and executors to consider professional advice when making and retaining investments, regardless of when they were made and regardless of any other provision. A point to take from Re Buckley is that any investment products or services acquired on behalf of the donor should be provided by individuals and firms that are regulated by the Financial Conduct Authority. One reason for doing so is that the donor’s investments will be covered by the Financial Services Compensation Scheme, where eligible deposits are protected up to a maximum of £85,000.
It is also important to ensure that the donor’s money and property is kept separate. Where investments are made, they should where possible be made in donor’s name (or where this is not possible, a declaration of trust or some other formal recording of the donor’s beneficial interest). Also, unless it would be disproportionate to do so, an application to the Court must be made for an order under s23 of the Mental Capacity Act 2005, in certain circumstances such as loans to the attorney/deputy’s family or investment in the attorney’s/deputy’s business.
In addition, a point to note is that where the investment sought is one of a short term, for example because the donor has a life expectancy of five years or less, then consideration should be given to short-term investment codes. It would seem wise to consult the donor’s family and close friends in such a situation. In Re Buckley, Senior Judge Lush said that consideration should be given to the interests of beneficiaries under the donor’s Will or intestacy. This will only really be applicable where (a) the capital that is available for investment is over £10,000, (b) it is not believed the donor’s situation is life-threatening and (c) when invested, the capital will sufficiently satisfy present and future income and capital requirements.
How can Nelsons help?
It may be that you are considering appointing an attorney, in which case you will carefully need to consider where the candidate has the appropriate skills and background. This is something that Nelsons would be happy to discuss with you – for more information please contact a member of our specialist team.
Or, if you are appointed attorney/deputy and wish to receive advice, or require investment advice from our Investment Management team who take on the responsibility for investing these funds on behalf of trustees, attorneys or deputies, please contact the team on 0800 024 1976 or via our online form.