From: Steve Worsfold at Sussex Will Writers

What are ‘Discretionary Managed Funds’?

‘Discretionary Managed Funds’ refer to when an investment professional known as a Discretionary Fund Manager, commonly known as a stockbroker or wealth manager, builds and manages a portfolio of investments on your behalf. They will consider how much you have to invest, the level of risk you are prepared to take, your financial goals, and your tax position, to make decisions as to how best to look after your invested money. If investments are not managed in this way, then advisers will have to obtain their clients’ instructions each time a change is made to the investments which has practical implications. 

Why is this relevant for LPAs? 

An attorney appointed under an LPA is not usually allowed to delegate their authority to another person, which would mean that they couldn’t use a fund manager to make decisions about the donor’s finances, however if a particular clause is entered into a property & finance LPA it allows any preexisting discretionary management schemes to continue, as well as allowing the attorney to take advantage of discretionary managed schemes as a way of managing the donor’s finances if they wish to do so. 

The wording which is entered into the preferences section of the LPA is as follows: –

“My attorneys may transfer my investments into a discretionary management scheme, or if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees.” 

Who should consider adding this wording to their LPA? 

Even if a donor does not have any discretionary managed funds at the time of making the LPA, their circumstances may change in the future e.g., the donor may decide to invest monies at a later date so having the clause in the LPA would allow this to then continue, or the donor could move into residential care and their home might be sold, the attorneys then, depending on the sums involved and the donor’s likely life expectancy, might be advised to invest the sale proceeds rather than retaining them in cash. At that point whether your attorneys have the option to use discretionary management schemes, or not, could become important. 

What happens if there is already an LPA in place but without the relevant clause? 

It was not standard practice to include the clause until 2016 so if you have a Property and Finance LPA in place but does not include this power,you have 2 options: 

1. Take no action: if the donor becomes incapacitated, the attorneys may find that the investments need to be moved to an advisory basis where the investment manager would need take the attorneys’ instructions each time a transaction is carried out, or the attorneys could apply to the Court of Protection to request that they are given the required powers. 
2. Make a new LPA including the required wording: this has obvious cost implications but is still likely to be cheaper than if the donor chooses to do nothing and the attorneys eventually must make an application to the Court of Protection to be given the necessary power. Due to the uncertainty over the OPG changing their guidance again in future, the likelihood of the attorneys needing the discretionary investment management powers, and the potential costs and delay in obtaining a court order, the donor may consider this option as the most appropriate course of action.

For advice on reviewing or creating a new Lasting Power of Attorney, please contact Sussex Will Writers for friendly helpful advice on:

Office: 01903 533681
Email: info@sussexwillwriters.co.uk

Lasting Power of Attorney Video Series 

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There are 7 parts to the series, exploring topics such as:

1. What is Lasting Power of Attorney?
2. What happens if you don’t have Lasting Power of Attorney?
3. Is there anyone who doesn’t need a Lasting Power of Attorney?
4. How much does it cost to have a Lasting Power of Attorney?
5. What is included in a Lasting Power of Attorney?
6. Who can write a Lasting Power of Attorney?
7. What are the rules for writing a Lasting Power of Attorney?

Could you do with some FREE, sound advice on:

• Writing a Will – What do I need and how much does it cost?
• Creating Lasting Powers of Attorney – If I was incapacitated who can act on my behalf?
• Property Protection Trusts – Can these really save Care Home Fees?
• Pre-Paid Funeral Plans – With so many to choose from how do I decide which plan is best?

There is so much confusion on these vital areas of estate planning, that sometimes just a chat with an expert in the field can clear up misunderstanding and set out the way ahead, without all the legal jargon.

Steve Worsfold
Affiliate Member of the Society of Will Writers
Advising on Wills/Trusts/Probate/Powers of Attorney

Mobile: 07734 744886
Office: 01903 533681
Email: steve@sussexwillwriters.co.uk
Website: www.sussexwillwriters.co.uk

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