Financial Abuse and Lasting Powers Of Attorney
In 2018 it was reported in the Law Society Gazette that investigations into the actions of attorneys and deputies appointed under the Lasting Power of Attorney (LPA) procedure had soared by more than 40% in the previous year. According to figures from the Office of the Public Guardian (OPG) 1,729 investigations into the actions of attorneys and deputies were carried out in the 2017/18 financial year- up from 1,119 the previous year. The figures were published after a Freedom of Information request and led to a call for more education about what people can and cannot do under a power of attorney.
A Lasting Power of Attorney is a legal document (“LPA”) that lets an individual (known as “the donor”) appoint one or more people (known as “attorneys”) to help them make decisions or to make decisions on their behalf.
What Are the Two Types of LPA?
1. Property and financial affairs, and
2. Health and welfare.
This article relates primarily to property and financial affairs.
The donor has to be 18 or over and have mental capacity when they make their LPA. The attorney needs to be over 18. They could be a relative, friend, professional or partner. Choosing an appropriate attorney is extremely important because the LPA gives them power to make decisions about the donor’s money and property, including the donor’s bank/building society accounts and property/investments. The donor must be able to trust the attorney to make decisions in their best interests.
Sadly, not all attorneys do act in the best interests of the donor, whether through their own ignorance of the rules governing LPAs, or because of deliberate financial abuse. In both cases, their actions usually affect elderly and/or vulnerable donors, and can also sometimes have implications for others.
What Are the Rules for an Attorney?
There are strict rules relating to what an attorney is able to do with the donor’s money and other assets under an LPA. The most important principle is that the attorney must act in the best interests of the donor at all times.
An attorney must generally keep the donor’s finances separate to his own. The attorney can use the donor’s money for the following purposes only:
1. To look after the donor’s home and buy anything they need day to day, for example, food, and
2. They can spend reasonable amounts of money on gifts or donations.
There are strict limits on gift giving. An attorney can spend money on:
- Gifts to a donor’s friend, family or acquaintance on occasions when they would normally make such gifts, for example, birthdays and Christmas, and
- Donations to a charity the donor would not object to, for example, a charity they have donated to before.
For any other type of gift or donation the attorney must make an application to the Court of Protection, even if the donor has given them before. These include: letting someone live in the donor’s property without paying market rent (anything they pay below the market rate is a gift); interest free loans (the lack of interest is a gift), or selling the donor’s home for less than the market value.
It is essential that the gift is proportionate to the size of the donor’s estate, i.e. it should be comfortably within what the donor can afford. Relevant considerations will include the following:
- Did the donor used to give gifts of this value when they had mental capacity?
- Would the gift affect the donor’s ability to meet their living expenses, including care costs, now and in the future?
- Will the donor have enough funds for the remainder of their life?
- Does the gift reflect what the donor has said they want to leave people in their will?
If the donor has mental capacity, they should decide whether to give a gift. If an attorney is unsure whether the donor does have capacity to make a gift, they could arrange a mental capacity assessment by a GP or psychiatrist to find out whether the donor has capacity to make their own decisions. This may be particularly important when deciding to give gifts of some value. The OPG may ask what steps the attorney took to establish whether the donor had mental capacity.
Conflict of Interest
An attorney must not take advantage or gain personal benefit from their position. A potential conflict of interest could arise for the attorney, for example, if arranging a loan to himself from the donor, which will also necessitate an application to the Court of Protection.
If the attorney is buying and selling property he will need to obtain legal advice if he is selling the donor’s property for less than the market value, or they want to buy the property themselves, or they are giving it to someone else.
Attorneys cannot give the donor’s assets away as gifts, or spend their money on gifts, to avoid care home fees, or so that they qualify for state benefits. This is known as “deprivation of assets”.
If an attorney gives a gift on the donor’s behalf that is not of reasonable value they could be breaking the law.
It is important for an attorney to keep records, including about any gifts that they make on behalf of the donor, and to document their actions and decisions.
Powers of the OPG include: launching an investigation; giving the attorney a warning; asking the attorney to pay back money or return gifts; applying to the court to have the attorney removed, and reporting the attorney to the police or other organisations. Abusing your position as attorney might amount to a fraud.
Possible ways of trying to combat financial abuse by an attorney could include contacting the OPG if financial abuse is suspected. The OPG may launch an investigation. Frequently, however, possible financial abuse only comes to light after the donor’s death, in which case it may well fall to the donor’s executor to investigate the attorney’s actions and, if necessary, take appropriate action to try to recover monies on behalf of the deceased’s estate. It is not just the donor who may be impacted by any financial abuse on the part of his attorney, but also the beneficiaries of his estate, who may find that their inheritance has been significantly reduced as a result of the attorney’s wrongful actions.
For useful and practical guidance relating to LPAs and the rules relating to attorneys, click here.