UK: Investment Criteria In The Court Of Protection

Last Updated: 20 June 2013
Article by Ann Stanyer

The recent case of Re Buckley provides an important message for those that act as attorneys or deputies regarding what they can and cannot do when investing a donor's or patient's funds. The case emphasises that the power to invest funds for those whose life expectancy is five years or less is extremely limited.

Re Buckley involved a Lasting Power of Attorney ("LPA") granted by Miss Buckley to her niece. Miss Buckley was 81 years old. The niece used Ł90,000 of Miss Buckley's money to invest in a risky reptile-breeding venture. This, amongst other things, was one of the grounds on which it was sought to revoke the LPA and the niece's appointment as Miss Buckley's attorney. The application was successful.

Senior Judge Denzil Lush took the opportunity to issue some important guidance to those managing the affairs of elderly people concerning investment. As Senior Judge Lush stated: "Managing your own money is one thing. Managing someone else's money is an entirely different matter". He noted that the elderly person's age and life expectancy are vitally important when considering the suitability of their investments.

Most people who make an LPA are older people, whose average age is 80 years and 11 months. The type of investment that will be in their best interests will be very different than for someone less senior. Senior Judge Lush suggested a short-term investment strategy for persons of 80 years and over and/or those with a life expectancy of less than five years, and listed the types of products that investments should be limited to. This list will likely make surprising reading for many attorneys and deputies as its conservativeness is notable: investments are generally limited to cash deposits and/or gilts.

Senior Judge Lush also emphasised that an attorney or deputy will not necessarily be able to make an investment that they think the elderly person would have made themselves if they had the mental capacity to do so. The relevant test is whether the particular investment will be in the elderly person's best interests. Further, Senior Judge Lush made clear that attorneys and deputies should abide by the provisions of s.5 of the Trustee Act 2000 which requires that proper advice from a qualified person is taken before making an investment. Senior Judge Lush's guidance does not affect existing investments that a donor or patient had in place when an attorney or deputy took over the management of their affairs; only investments that the attorney or deputy make on behalf of the donor or patient going forward.

Re Buckley shows that attorneys and deputies have very little flexibility when making new investments for elderly people and will need to take great care when making their selection and should always take proper financial advice. Attorneys and deputies who do not do so, could find themselves exposed to legal action and removal from their post.

The case also highlights how LPAs are subject to the supervision of the Court of Protection. Donors who do not want their attorneys to be subject to this level of supervision, should consider alternative ways of giving authority to loved ones in the event of loss of mental capacity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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