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What Are Problem Areas With LPAs?

Posted: Friday, 2 July 2021 @ 11:59

What are the key problems areas with LPAs?(Lasting Powers of Attorney)

These are some of the examples of events which might raise concerns about whether the attorney’s powers are being used properly.

Dealing with complaints about mental capacity

When a donor is unwell, or losing their mental capacity, family members who are not appointed as attorneys might sometimes try to make complaints on the donor’s behalf. This could be because they believe that someone has misled the donor – by mis-selling an investment, for example.

They might also object to the actions of the attorneys themselves. Family disputes are difficult to resolve, as banks are only able to provide information to their customers or their official representatives. The same rules apply to people who bring their complaints to us. Though a financial business should not act on unproven allegations made by other family members, they do have a duty of care to their customer. So, if the business thinks a power of attorney is being abused, they should report it to the relevant authority. They might also decide to refuse to carry out some instructions – like transferring of money from the donor to the attorney’s account.

Excessive gifts

Whilst attorneys can make gifts to people related to or connected with the donor, including themselves, these gifts should only be on customary occasions (for example birthdays, Christmas, etc) and should not be unreasonably large.

The gifts should also not be disproportionate to the pattern of giving the donor did when they had capacity. One of the consequences of an Attorney exceeding his or her authority could be realised at the time of dealing with an individual’s estate. At that time, the Revenue will ask to see a copy of the Power of Attorney and will then look to see what gifts have been declared being made during the last seven years. If the Donor had lost capacity and gifts were continuing to be made the Revenue may argue that the gifts are void and the value should be aggregated to the estate, with a result that the additional Inheritance Tax will be payable, plus there will be the potential for interest and penalties. Matters could be even worse if there is evidence that there is a general deficiency in a Donor’s funds because an Attorney has been withdrawing excessive sums from his or her account.

In the case of R v TJC [2015] EWCA the Court of Appeal (Criminal Division) held that in such circumstances the Attorney would be guilty of an abuse of position under Section 4 of the Fraud Act 2006. In this case the withdrawals being made by the Attorney were unreasonably high given the needs of the Donor.

The conclusion was that the Attorney could not have been acting honesty when managing the affairs of the Donor. It is easy to believe that as an Attorney, you are, in effect, standing in the same shoes as the Donor, and can act as he or she would do.

It is important for the Attorneys to remember that they must always act in the best interest of the Donor. An attorney needs to take particular care if he or she is thinking of accepting a gift from the person’s estate.

If one does accept a gift, the Court of Protection can look carefully at whether the person had capacity and may decide the attorney went beyond authority.

In the case of PG v DH [2014] EWCOP 15 (15 July 2014), Senior Judge Lush decided that the facts pointed to the ‘donor’ of a power of attorney (the legal term for the person who made it) lacking capacity to agree to a loan her son had taken out on her property. In this case, the donor’s loan counted as a gift to her son. Senior Judge Lush commented that: … even if VH had the capacity to make the gift, it was reprehensible [wrong] of him [the attorney] to have accepted it… and shows that when faced with a conflict between his interests and his mother’s, he would place his own interests first.

Loan applications or credit cards taken out in the donor’s name

This could raise concerns about potential misuse of the attorney’s powers, particularly if the donor does not benefit from the loans or credit cards.

This could raise concerns about potential misuse of the attorney’s powers, particularly if the donor does not benefit from the loans or credit cards. In Re Harcourt,[1] Mrs Harcourt’s daughter became an attorney after her mother lost capacity. Suspicions were raised when the care home manager became aware of letters about bank loans and credit card applications being taken out by the daughter in her mother’s name. The matter was consequently investigated, and it was revealed that the daughter had abused her powers of attorney to make personal financial gains.