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The legal pitfalls of LPAs

07/01/2019 Sarah Clacker, private client associate, Seddons ,

The Financial Times recently reported that Court actions against people with Lasting Power of Attorney (LPA) for vulnerable people have jumped in the past year, with cases against individuals rising by 71 percent. 

The Office of the Public Guardian (OPG) made 465 applications to the Court of Protection (COP) to censure or remove attorneys in 2017-18, up from 272 in the previous year. Making improper gifts and not acting in the vulnerable person’s best interests were two of the main reasons for having attorneys censured or removed. 

It is likely that the frequency of abuse is much greater than that.  Most donors appoint family members as their attorneys and unless a third party is involved somehow – for example, a care home, a professional advisor – how likely is it that the OPG will be aware of any abuse?

So, what’s going wrong? Quite simply, LPAs are easy to prepare and it follows, easy to abuse. We play an imperative role in educating clients on the importance of an LPA and the effect of a bad decision made by an attorney.  As professional advisers, what can we do to limit the risk of abuse?

Trust and competence

We all advise donors to choose an attorney that they trust but it is just as important to appoint someone who is up to the job.   For example, does the attorney have the time to act? Would a family member be the best person to run the donor’s business? Do they have the relevant expertise bearing in mind the donor’s asset base? Would they understand their limits and know when to seek appropriate advice from other professionals (accountants, financial advisers etc)?

In addition, it is often the case that clients appoint all of their children because they believe that is the right thing to do, even where there is a family relationship breakdown.  It is up to us to outline what can go wrong at a later date, even on joint and several appointments. 

Consultation with others in decisions to be made

It can be a good idea for donors to add a clause into the LPA requiring the attorney to consult with the donor, co-attorneys, friends, medical professionals, and any other relevant named individuals when making any decisions.   The attorney is under a statutory duty to do this, but even though the prescribed LPA form refers to the Act and the Code of Practice, it’s unlikely that a lay attorney will take the time to read either. Therefore, an express clause in the LPA would make clear how the attorney is expected to act.

Supervision

The advantage of a deputyship order over an LPA is the supervision aspect by the COP.  However, adding in a supervision condition in the LPA works in the same way.  This can be as simple as the attorney having to provide bank statements to a co-attorney or other relevant person (such as the donor’s accountant) or more complex such as audited accounts on a yearly basis.  

This provides accountability on behalf of an attorney with the hope that any rogue attorney who is making transactions outside the scope of their powers, would be found out sooner rather than later and any loss to a donor’s estate would be minimal. 

Educating attorneys

Most attorneys are unaware of their powers when making gifts.  An attorney has limited powers to make gifts under s12 MCA to charities or people associated with the donor, provided the gift is reasonable in the circumstances and in relation to the size of the donor’s estate.  Unhelpfully, the current prescribed LPA form has nothing to alert the attorney to this and therefore, whilst the attorney is not our client, it is good practice to give clear guidance to attorneys and explain the consequences of failure to adhere to these rules; i.e. the risk of removal as an attorney by the COP and a media presence!

Once you have had these conversations with your clients, there is no doubt that they will see the added value of your knowledge and expertise, recognise the power of LPAs and understand the risk they take in preparing their own online versions and ultimately, limit the cases of misuse in the future.   

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