Retired Court of Protection judge, Denzil Lush, recently warned against Powers of Attorney, stating that ‘people should be more aware of the risks’. As a prominent figure in the legal world, this statement brings the legitimacy of LPOAs into question… are donors taken advantage of? What alternatives are available?
Registering for a Lasting Power of Attorney (LPOA) is meant to provide reassurance to
people who may need someone to take control of their assets later in life, usually as a result of declining health or ability. But recent warnings have seen some lawyers questioning the regulations, and whether they adequately protect those who are the most vulnerable.
The Mental Capacity Act 2005 brought in new rules to protect people when they become incapable of handling their own affairs due to a lack of mental capacity. Clients, known as donors, can apply online or through their solicitor, allowing them to appoint one or two people as their attorney – officially giving them the right to act on their behalf and providing them with power over their financial assets.
A vast amount of people rely on the LPOA legislation, with almost 650,000 applications made to register last year, and 2.5m currently registered. (1)
The person appointed as attorney is legally bound to carry out the wishes of the donor, but retired judge and legal author, Denzil Lush, warns that this doesn’t always happen. He made headlines recently when he said that ‘people should be far more aware of the risks’ and has vowed to never sign one himself. (1)
Over the years there have been a number of cases of attorneys taking advantage of their donor. This year a man was jailed for befriending his elderly neighbour and taking control of his finances through the POA for personal gain, whilst in 2013 a 92-year-old woman’s nieces abused the power and spent her life savings without her knowledge.(2)
The biggest issue, according to Denzil, is that "lack of transparency causes suspicions and concerns which tend to rise in a crescendo and eventually explode".(1)
Attorneys can withdraw money and sell the donor’s financial assets, all without a word of suspicion being raised. To become an attorney is entirely at the disposal of the donor – although there is a legal process to go through before the appointment can be confirmed.
The only secure safeguard in place is that a solicitor (or anyone else) can report an attorney they suspect of abuse to the Office of the Public Guardian, who will then investigate the issue. However, this is on a case by case basis, so it’s no wonder that there are instances of fraud and abuse bubbling to the surface. Often only the donor and the attorney themselves are in a position to know what’s happening with their money.
Denzil Lush instead advocates using the Court of Protection as a substitute for an Attorney, stating that although it’s more expensive, there are far stronger safe-guarding measures in place. The Court of Protection are an unbiased source who decide if you have mental capacity, and will appoint relevant deputies in your stead.
Denzil claims that there is far more scrutiny with this method as deputies ‘have to provide a full list of assets, annual accounts, and a security bond, which can be easily claimed if there is a problem with money being spent inappropriately’(1) - the same formality does not exist for an attorney appointed by the donor.
Whilst using the Court of Protection may be the safer option, it’s also likely to be a lot more expensive and much less convenient than appointing someone you know and trust to act for you.
It’s also difficult to see how the current system would cope with the demands of the sheer numbers of people who might want to use their service, given the current high levels of interest in LPOAs. As the population gets older, that demand will only increase.
Another option that many people use is to appoint an independent and experienced person as their Attorney, often in the form of their solicitor. Lawyers in the UK are bound by strict rules of conduct, especially in the area of handling clients’ funds, and are backed up by professional indemnity insurance in case things go wrong. Your solicitor will act in your best interests and ensure that you’re not being taken advantage of.
The services of a solicitor to act as your Attorney carries extra cost, and you should enquire about the solicitor’s experience in this field as well as their processes for dealing with, and reporting on, your affairs. It may be money well spent, though, if it gives you the reassurance that you have a trusted professional managing your affairs, should it become necessary.
It also helps avoid family conflicts and misunderstandings about how the duties of the Attorney are carried out, a common source of problems when a person’s health starts to fail.
Despite Denzil Lush’s concerns, the fact remains that it is much better to have an LPOA in place than risk going without. It’s only possible to make your own choice of Attorney whilst you are mentally capable of doing so, and future planning is essential if you are going to ensure that you are properly looked after later in life.
Leaving things to chance - which is ultimately where you are with a Court of Protection application, as you have no control over who applies to the court, and when they do so - means you don’t know who will be in charge of your decisions should you become too infirm to do it yourself.
At Chesterton House our Legal Team have many years of experience in this field and understand the problems that can arise. They will explain how a Lasting Power of Attorney works, and guide you towards the best way to set up this important part of your future planning. If you’d like to arrange a chat with one of them, just contact our office.
Sources: https://www.gov.uk/courts-tribunals/court-of-protection
http://citywire.co.uk/money/92-year-olds-wealth-looted-by-relatives-with-power-of-attorney/a689013
http://www.bbc.co.uk/news/uk-40887323