You have been managing your client’s money for many years when, out of the blue, you are contacted by someone claiming to be your client’s attorney. The attorney is brandishing a copy English Property and Financial Affairs Lasting Power of Attorney (LPA), certified on every page (as it should be) by the donor (i.e. the giver) of the power. So far, so reassuring. But is it safe for you to act on the attorney’s instructions? Here’s some food for thought.
First, an unregistered LPA confers no authority on anyone. Until an LPA is registered at the Office of the Public Guardian, the attorney cannot act on it.
The OPG has a searchable register of LPAs which, if the value of the transaction in monetary or emotional terms is particularly significant for the donor and his family, you might think it prudent just to double check.
Next check for any restrictions or conditions set out in the LPA – is the attorney acting within his authority in giving you these instructions?
If you do these two things, you will be protecting your position quite well because the donor of a power is bound by any act of his attorney which is, or appears to be, within the attorney’s authority to carry out. A disgruntled donor will have to seek redress from his attorney, not from your professional indemnity policy.
However, what if the donor has revoked the LPA and the attorney doesn’t tell you? As long as you had no knowledge that the LPA is now invalid or are aware of any circumstances that would have terminated the attorney’s authority to act under the LPA, you have statutory protection. It may be the case, though, that some basic awareness of the law is assumed, so if you (or some other part of your business) hear on the grapevine that either the donor or the attorney is bankrupt, or the donor is dead, and you continue to take instructions from the attorney, you are taking a risk and may not be able to recover your fees for acting.
Consider whom your contract should be with. If you are able to contract with the attorney, perhaps it is an opportunity to include a term that, in giving you instructions, the attorney is warranting that he has the necessary authority to do so and will indemnify you if otherwise. Contracting with your attorney also gives you the opportunity to carry out your customer due diligence procedures, which may throw up further information about the attorney that you would want to know.
I have picked on investment managers in this blog for a reason! The Code of Practice to the Mental Capacity Act 2007 states that '...if the donor wants the attorney to be able to give authority to a specialist to make specific decisions, they need to state this clearly in the LPA document (for example, appointing an investment manager to make particular investment decisions)’. Make sure your client’s LPAs are fit for purpose by ensuring that they include an appropriate condition to this effect. Otherwise it is not entirely clear where you stand.
The above assumes you are an adviser based in England and Wales, confronted with an English LPA. Non English powers of attorney and indeed Enduring Powers of Attorney are quite another matter, but those are stories for another day.