How Attorneys and Trustees Should Invest Money in their Care
Published / Last Updated on 20/09/2024
A Lasting Power of Attorney (LPA) is where you appoint somebody whilst alive to look after your affairs if you lose physical or mental capacity.
A Last Will and Testament is where you set out what is to happen with your affairs on death where you appoint executors (to carry out your will instructions) who are usually also the trustees of your wealth held in trust (for beneficiaries) until probate is granted or if the trust in the Will is to last longer say over a period of 80 years as a legacy for future generations (e.g. discretionary trust) or a Child/Vulnerable persons trust where wealth is looked after by the trustees until e.g., the child reaches ages 18 or 21.
- The person who appoints you to look after their affairs if they lose physical or mental capacity whilst alive is called the 'donor'
- For ‘stand lone’ trusts and trusts inside Wills, the “settlor” "grantor," or "donor” is the person that is gifting wealth into trust for others (the beneficiaries).
Trustees and Attorneys Responsibilities
As an attorney or trustee, you are required to look after wealth on behalf of another in their best interests not yours. You are personally liable if you do not. This includes investing and managing any cash, pensions, or investments.
Recently, we spoke with a legal adviser on the same subject and the guidance they offered was as follows:
Attorneys/Trustees must act in the best interests of the donor or beneficiaries.
- Attorneys/Trustees must not impose their own views. E.g., just because you dislike investing in China or you look socially responsible and ethical investment, you cannot invest in the way you would want, you must invest in the best interests of others.
- Attorneys/Trustees cannot invest within a risk profile that suits you, it must be within a risk profile that is in the best interests of others. If you are cautious but the wealth is held in trust for a longer period, you should take a more balanced view which should be ‘managed’ and with full exposure to markets and risk, if that is in the best interests of others.
- Attorneys/Trustees, in taking a risk profile approach balanced, ‘medium’ risk level with tolerance to losses/volatility ranges of +-20% pa and no more than +-30%/40% pa in extreme investment conditions for medium and longer term money and a lower risk profile level with tolerance to losses/volatility ranges of +-5-10% pa and no more than +-10%/20% pa for monies that may be needed in the shorter term e.g., within the next 5 years.
- Attorneys/Trustees should always seek legal advice and independent financial advice on actions and investment of monies to demonstrate that you are acting in good faith and best interests as well as demonstrating that professional help/advice has been sort so that your own views do not create a conflict of interest and are ‘arms length’.
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