Investments and everyday money in your LPA

Your LPA can tell your attorneys how you like your money handled. You can say how you prefer to invest, how much you like to keep in your current account, and when they must take advice. Without that, your attorneys have to guess. The court has made clear that guessing wrongly with someone else’s money has consequences.

This guide is one of a series on the preferences and instructions our LPAs offer. All the clauses here are for a property and financial affairs LPA.

Reinvesting into your ISA allowance

What it does. This preference says you would like the interest from each year’s investments put into next year’s ISA allowance. It is almost word for word one of the examples in the official guide.

Why it helps.

• It shows your habit. If you already do this, your attorneys know to carry on.
• It keeps things simple. Your attorneys do not have to work out a new plan each year.

Investing in ethical funds

What it does. This preference says you would like your money invested in ethical funds where possible.

Why it helps.

• It records your values. Attorneys must consider the beliefs and values that would guide your decisions. Writing them down makes that much easier.
• It avoids an awkward surprise. Your family will not find your savings in businesses you would never have backed.

Investing in low-risk products

What it does. This preference says that if your attorneys invest your money, you would like them to choose low-risk products.

Why it helps.

• It sets the tone. Your attorneys know you value safety over chasing a high return.
• It matches what the court expects. As the case below shows, the court takes a cautious view of investing for older people.

Keeping a minimum balance in your current account

What it does. This preference says you would like at least a set amount kept in your current account. You choose the figure.

Why it helps.

• Bills get paid. Care fees, rent and direct debits keep going out without a hitch.
• Money stays easy to reach. Your attorneys will not tie up cash you may need soon.

Consulting a financial adviser before investing

What it does. This is an instruction. Your attorneys must consult a financial adviser before making any investment over an amount you choose. Smaller sums can be handled without advice.

Why it helps.

• It protects large sums. Big decisions get a second, expert opinion.
• It protects your attorneys. An attorney who took advice can show they acted with care.
• It is clear. Your attorneys know exactly when advice is needed.

What the law and official guidance say

The Mental Capacity Act 2005 says that anything done for a person who lacks capacity must be done, or made, in his best interests. To work out best interests, an attorney must consider your past and present wishes and feelings (and, in particular, any relevant written statement made by him when he had capacity). They must also consider the beliefs and values that would be likely to influence his decision if he had capacity. Preferences in your LPA are exactly that kind of written statement.

The Office of the Public Guardian’s guide explains the difference. Preferences are what you’d like all your attorneys to think about when they make decisions for you. Your attorneys don’t have to follow them but should bear them in mind. Instructions tell your attorneys what they must do when acting on your behalf.

The guide gives example preferences very close to ours. They cover reinvesting interest into your ISA allowance, keeping a minimum balance in your current account, and ethical funds. Its example instruction is that attorneys must consult a financial adviser before making investments over £10,000. It also warns that Complicated or badly worded instructions or preferences can make an LPA unworkable.

If you already have investments run for you by a professional manager, the guide suggests taking legal advice. Some providers say those arrangements end when you lose capacity unless your LPA deals with them.

Without these clauses

• Your attorneys have to guess. They may not know you cared about ethical investing, or liked to keep a cushion in the bank.
• Family members may disagree. One may want to play safe while another wants growth.
• Nobody has to take advice. Your LPA itself does not require it, though the court expects care.
• Money can end up in the wrong place. A well-meaning attorney can still make a poor choice.

What happened in Re Buckley

Miss Buckley was born in 1931 and lived in a nursing home in Kent. The fees were £985 a week, and she paid them herself [3]. In 2010 she made a property and financial affairs LPA. She appointed her niece as her only attorney [4].

Her house was sold for £279,000 in 2011. The niece then withdrew £72,000 to put into a reptile breeding business. She said it was a short-term investment that would return 20% over two years [10]. The Office of the Public Guardian later estimated that at least £87,682.53 had gone into the venture. It said a further £43,317.47 had been used without consent [14].

The niece said a family friend had told her to invest some of the money. She chose the reptile business because her aunt loves animals and she felt her aunt would be happy with it [15]. She did not accept that she had done anything wrong.

What went wrong. Senior Judge Lush explained that Managing your own money is one thing. Managing someone else’s money is an entirely different matter. [21]. People managing their own money can make unwise decisions. None of these options are open to an attorney acting for an incapacitated donor [23].

He found that it was a highly unsuitable investment to make and she broke almost every rule in the book in making it [49]. In particular:

• No proper advice. One can hardly describe a man who runs a reptile breeding business as someone who is qualified to give investment advice [50].
• Far too risky. When investing funds on behalf of older people, the perceived wisdom is that the investments should be safe and that very little risk is acceptable [51].
• A conflict of interest. The judge found the niece had invested in her own business [52].
• The wrong name. The investment was in the niece’s name, not her aunt’s [53].

The judge suggested that attorneys follow the rules trustees must follow when investing [41]. That means thinking about whether an investment is suitable and whether to spread the risk. It also means getting proper advice first, unless that is reasonably thought unnecessary [26] [28]. He added that Ignorance is no excuse. [44].

What the court decided. The court revoked the LPA [60]. The Office of the Public Guardian had said a deputy might need to take action against the niece to recover the money [14].

The lesson. The niece believed she was doing what her aunt would want. Good intentions were not enough. The court expects advice and caution when an attorney invests. Writing your own wishes down, and saying when advice is a must, gives your attorneys a clear standard to follow. No clause can stop a dishonest attorney, but it makes the right path easy to see.

Preference or instruction?

The ISA, ethical funds, low-risk and minimum balance clauses are preferences. That leaves your attorneys room to adapt if markets, tax rules or your needs change. The financial adviser clause is an instruction, so your attorneys must follow it. This matches the official guide’s own examples.

For related wishes, see our guides on accounts and professional help and gifts and charity.

This article is for general information and is not legal or financial advice. If you have investments managed for you, or you are an attorney unsure how to invest, please get in touch.

Sources

• LP12: Make and register your lasting power of attorney, Office of the Public Guardian. Section 7, preferences and instructions.
• Mental Capacity Act 2005, section 1. The principles, including best interests.
• Mental Capacity Act 2005, section 4. How best interests are worked out.
• Trustee Act 2000, section 4. The standard investment criteria.
• Trustee Act 2000, section 5. Taking proper advice.
• The Public Guardian v C (Re Buckley) [2013] EWCOP 2965 on Find Case Law. Senior Judge Lush, 22 January 2013.
• The Public Guardian v C (Re Buckley) [2013] EWCOP 2965 on BAILII