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How to advise clients acting under power of attorney

How to advise clients acting under power of attorney
 Photo by Andrea Piacquadio via Pexels

There is a lot of emphasis on ensuring clients have a power of attorney in the event they can no longer make their own financial decisions.

But when an attorney starts making decisions on someone’s behalf, how does this affect the advice relationship?

Attorneys acting for someone else – the donor – have to observe specific duties and responsibilities that are potentially set out in the power of attorney or in law, says Dave Robinson, a director at Centurion Chartered Financial Planners.

“Attorneys can’t just deal with somebody else’s money as they would deal with their own. They have to take into account what the instructions given to them are and what the law says about how they should do things.”

For example, attorneys appointed under a lasting power of attorney must consider the Mental Capacity Act Code of Practice when they act or make decisions on the donor’s behalf.

Once it has been established there is a power of attorney, an adviser should ask to see the document itself, says Alice Martin, of counsel at law firm Charles Russell Speechlys.

“You will be able to tell from looking at the lasting power of attorney if it has been registered. The first, important thing to know is that if it is not registered, it is not valid.

“This is unlike the old enduring powers of attorney, which could be valid the second they were signed without being registered.”

The next important detail, says Martin, is to ascertain who the attorney or attorneys are, and how they are appointed if there is more than one.

“Are they appointed jointly, which means that they must act unanimously, so you've got to report to all of them – you've got to get all of them to sign off and agree on everything?

“Or are they appointed jointly and severally, which means either one or any one of them can make decisions, so they can act independently?

“That should be clear from the document itself, so you're going to need to read the power of attorney.”

Robinson at Centurion adds an attorney will likely be a professional, such as a solicitor, or a friend or family member of the donor. “Dealing with a solicitor is very different to dealing with a family member,” says Robinson, where the latter may be affected by the donor’s lack of mental capacity.

David Gruenstein, a senior adviser at The Private Office, also notes the importance of supporting the attorney. “They could just be a lay person [and the donor] might have a more complicated financial situation than the attorney.”

Setting expectations

Where attorneys can act independently, Martin at Charles Russell Speechlys suggests it would be wise, although not legally necessary, for an adviser to have a written understanding on how decisions will be made; for example, if there is an agreement among attorneys that one of them will be the primary contact, or whether the adviser will correspond with all of them.