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In recent years there has been a significant increase in the number of people being taken to court for abusing their position of trust as someone’s attorney under a Lasting Power of Attorney (or an old style Enduring Power of Attorney) or failing to act in the best interests of the donor of the power. There have been 721 applications to censure or remove attorneys in the last year, compared with 465 the year before and 250 in 2017. Rather depressingly, the majority of cases of financial abuse involve family members.
A Lasting Power of Attorney (“LPA”) is a legal document that gives authority to act on another’s behalf if the donor of the power (the person granting the LPA) loses mental capacity through illness or accident.
The Mental Capacity Act 2005 (“MCA 2005”) sets out the principles which attorneys must observe if they have to make a decision about money, property, health or welfare on behalf of someone who is unable to make the decision for themselves. The overriding principle of the MCA 2005 is that attorneys must always act in the donor’s best interests.
The most common abuses by attorneys involve making improper gifts without the vulnerable person’s fully informed and independent consent (or the court’s consent – see below) or not acting in their best interests.
The LPA arrangement does have its benefits and is something that we recommend every adult puts in place to cover the possibility of them experiencing a life-changing event which leaves them incapable of making decisions for themselves, permanently or temporarily. However, very careful thought should be given to who you name as your attorney(s). Attorneys have, in theory, the power to make any decision that the donor could have made, and so from a financial perspective, attorneys could have unrestricted access to all of your money and investments. Internet banking might mean that there is very little oversight of the attorneys’ actions unless and until someone else raises the alarm.
If you name a child or children as your attorneys, or just one person as your attorney, you should feel wholly confident that they will always put your own needs first until the end of your life and not regard spending money on you as spending their inheritance. We would strongly recommend that you discuss your options for setting up the power of attorney arrangement with someone independent of your family who can help you to work out the best arrangement, and choice of attorneys, to ensure that your needs will come first. We can discuss your options for including checks and balances in the LPA arrangement.
If you are an attorney and likely to have to make decisions, you must familiarise yourself with the principles of the MCA 2005 and the Code of Practice which can be found on the gov.uk website. Doing so will help to ensure that you respect the donor’s decision-making independence and that you do not abuse your position.
Attorneys should always be ready to demonstrate how they reached their decisions and their adherence to the five principles of the MCA 2005, even if they are never asked to. If anyone has concerns about how an attorney is fulfilling their duty towards the donor, they could contact the Office of the Public Guardian and/or the police and ask them to investigate the matter further.
Attorneys must always keep their own money and the donor’s separate and keep clear and detailed accounts of expenditure incurred on the donor’s behalf both during their lifetime and after their death.
If an attorney wishes to use the donor’s money to make gifts, they must be aware that gifts by attorneys are very restricted by the MCA 2005 and detailed guidance can be found on the gov.uk website. Minor gifts to close family or friends for birthday or Christmas are allowed if the LPA authorises it. For all other gifts, or using the donor’s money to support someone other than the donor, attorneys are not authorised to do this unless the expenditure is permitted within the MCA 2005 or until the Court of Protection has made an order authorising it. Examples of expenditure requiring authorisation would include Inheritance Tax planning gifts, paying grandchildren’s university fees or using the donor’s money to make adaptations to your property for a “granny annexe”.
If you are an attorney and would like guidance in relation to particular decisions or to better understand your role and responsibilities, please contact Caroline Farmer or another member of the Private Client team. We can also assist with applications to the Court of Protection for attorneys or in circumstances where someone has lost capacity but does not have an LPA in place.