However, in cases where there is no power of attorney, an application for deputyship can be made to the Court of Protection. A CoP application requires a medical practitioner’s report to be submitted outlining the person’s ability to make decisions and any medical issues that might affect their capacity, full disclosure of the person’s financial affairs and a process of giving notice to relatives or other people who may be involved in looking out for their financial best interests.
The Court will then make the ultimate decision as to whether or not the person lacks capacity and, if they do, will appoint a deputy to manage their financial affairs. This is usually a family member but could also be a friend or professional adviser.
Discretionary Investment Managers
One issue of particular relevance to financial advisers is that powers of attorney rely on the law of agency, which does not automatically allow attorneys to delegate any decisions, including those relating to investment, unless specifically authorised by the donor.
This means, in practice, that the attorneys for many donors who have lost capacity cannot delegate investment decision-making to a discretionary fund manager, and may not be able to take out discretionary managed funds or continue to use existing products without authorisation from the Court of Protection.
Donors who have funds managed by a DFM, or who might in future be expected to do so, will therefore need to ensure their financial LPA includes a suitable instruction permitting the use of discretionary managed funds.
It can be difficult to agree wording that is acceptable both to the investment manager and the Office of the Public Guardian, so clients should in such cases refer to a solicitor who has proven experience of inserting such clauses successfully.
By contrast, a court-appointed deputy has the power to make any decision that the person who has lost capacity might make, subject to some limitations set out in the Mental Capacity Act 2005 and any specific provisions of the deputyship order. It is likely to be easier for a deputy to use discretionary funds but it is still important to check that the deputy has authority to use the intended investment.
Chris Burrows is partner and head of private client at Glaisyers Solicitors
