Manage financial affairs under a lasting power of attorney
Making a lasting power of attorney for your finances is an important part of lifelong legal planning, especially if you have built up a portfolio of assets and investments that require regular management. While this legal authority should be in place well in advance of when it might be required, it can also be difficult to predict exactly what situations might arise in the future.
Fortunately, our private client notaries have assisted many people in the drafting and implementation of powers of attorney, and they know all the potential pitfalls.
As a general rule, the best practice is to give your lawyers flexible and broad powers so that they can act in your best interests despite changing circumstances. In addition to managing bank accounts and selling real estate, you can clarify your wishes for a wide range of financial decisions, especially if you have complex or international heritage.
Some of the key issues to discuss with your lawyer before they can draft your enduring financial powers of attorney are set out below:
You may have investments in certain funds that require your express consent before your attorneys can be allowed to process them.
A common problem we see with an enduring power of attorney that has not been professionally drafted is that it does not allow money to be held in discretionary managed funds. If you hold assets in such funds, your lawyer will not be able to access those assets on your behalf without another costly and time-consuming application to the Protection Court.
Even if you do not hold such funds, it may be in your best interest to keep your assets in this way in the future. Your enduring power of attorney may include a provision allowing your attorneys to invest funds in this way. If it does not contain such a provision, your lawyers will be limited as to the types of funds they can invest in on your behalf.
When assets are held in trust, you need to think about how your lawyer will interact with the trustees. If you are a trustee or a beneficiary of assets held in trust, you may need to allow your attorneys to access trust records and liaise with the trustees on your behalf.
If you hold assets overseas, it is important to note that a durable financial power of attorney made in England and Wales may not be recognized by the jurisdiction in which those assets are held. In such a case, your attorneys would be unable to manage these assets for you without further authorization.
To save your lawyers the expense and difficulty of having to manage this when you no longer have the capacity, you should seek legal advice in each separate jurisdiction in which you hold assets to ensure that your lawyers can act. on your behalf around the world.
The law provides that lawyers can make small gifts on your behalf in limited circumstances, but you can allow your lawyers to give larger or more regular gifts.
For example, you may want your lawyers to make such donations for tax planning purposes because you already regularly make generous donations to certain people, or because you would like to support family members who might need help. ‘a little additional financial assistance.
Whatever the reason, you will need to include a specific authority to authorize such donations. Depending on the nature of the gifts you want your attorneys to give, such an authority may include details to whom gifts can be given, on what occasions, and the financial limits of those gifts.
You may be worried about a family member or other dependent who is financially dependent on you, especially if they are unable to manage their own finances.
Your power of attorney will only come into effect if you lack capacity, and your attorneys must act in your best interests at all times. There may be times when your interests conflict with those of your dependent. In these circumstances, your lawyers should make sure that your financial needs are taken care of, but it could be to the detriment of your dependent.
This will require careful thought and discussion with your lawyer who can advise you on how to include specific instructions in the enduring power of attorney in order to extend the powers of your lawyers.
If you run or have an interest in a business, you need to ensure that the attorneys appointed for your business decisions have the insight and business acumen to continue to run things well.
If you want to appoint separate agents for your business decisions, you will need to make two separate enduring financial powers of attorney, one for your personal financial decisions and one for your business decisions. You should get professional legal advice before doing this, to make sure the two don’t contradict each other.
With each of these potential issues, as well as any other specific financial concerns you may have, it is essential to ensure that the additional powers granted to your attorneys are properly drafted. Preferences and instructions must provide the necessary authority while respecting the law.
If your instructions conflict with pre-existing laws, the law will always prevail and your attorneys will not be licensed as you wish. It is important to seek professional advice to ensure that wishes can be met in a manner compatible with all necessary legalities.
Avoid common mistakes
Many people choose to name their closest friends or family without considering whether that person is suitable for the job. If your closest friend, or child, is not good with their own money, consider giving them yours.
Regardless of the type (or types) of enduring power of attorney you choose to do, it is advisable to appoint more than one attorney, or alternate attorneys who would step in if your prime attorney could no longer act for you. By appointing only one attorney and no replacement, you run the risk that that person will be unable or unwilling to act and have no one to look after your affairs on your behalf.
How can we help
Before making your lasting power of attorney, we can guide you through the types of decisions you need to consider and advise you on the appropriateness of the powers you intend to grant.
Our attorneys will prepare your enduring power of attorney, as well as draft the documents for you to ensure that all of your requirements are clear and legally binding.
For more information, please contact Aaron Spencer, Head of the Private Client Team on 01227 763939.