“I would recommend that a discussion is had with all attorneys, even if they're appointed jointly and severally, so the financial adviser has an understanding and that is recorded, as to who they will correspond with and take instructions.”
Another detail Martin says advisers should pay attention to is whether attorneys have permission to make decisions while donors still have mental capacity to make their own financial decisions.
“Many people will put in place a power of attorney and they want to keep it very flexible, so you might have a married couple who appoint a power of attorney to each other concurrently. So it doesn't require that either of them have lost capacity.
“Where that's the case, I strongly recommend that financial advisers – once they're aware of that, and they've seen the power of attorney – that they have a discussion, and it is recorded in writing, that their expectation is they will take instructions only from the donor while they have capacity.
“But do they want the attorney copied? And if the attorney were to contact the financial adviser with any instructions or requests, how would that be handled?”
Delegation and discretionary investment management
It is also important to be aware of any restrictions or limitations, which should be detailed in the power of attorney, Martin adds.
“One of the most important ones, which can get very easily overlooked, is that granting a power of attorney does not permit the attorney to delegate discretionary investment management, unless it specifically has wording in it that says you can.”
There are also restrictions on gifts during lifetime. “Small, regular gifts are generally permissible if they're part of a previous pattern for birthdays and Christmases, for example, but not significant gifts,” says Martin.
An attorney cannot usually make substantial gifts that often form part of estate planning strategies without approval by the Office of the Public Guardian or the relevant court.
The grey areas of mental capacity
A donor must have mental capacity when they make an LPA.
Something to consider is talking to clients before they potentially lose capacity, says Edward Grant, a director at support services business Technical Connection. “Agree upfront with your client, before they lose capacity, how they would like you to act, and for you to meet the attorney in advance,” he suggests.
Martin at Charles Russell Speechlys warns of “tricky grey areas” when there is a capacity issue that is in the early stages, such as someone with early stage Alzheimer’s.
“How is the financial adviser going to ensure they're taking instructions from the right person? Because they would be potentially at risk if they are taking instructions from someone who's lost capacity.