What is financial abuse by Attorneys?

Aimee Phillips, specialist solicitor in Will disputes at Holmes & Hills discusses concerns of financial abuse by Attorneys and what you can do to try and combat the risk.

Enduring Powers of Attorney (EPAs) and Lasting Powers of Attorney (LPAs) give a person or persons (the Attorney(s)) the authority to act for another person (the Donor) in relation to their financial property and affairs and/or their health and welfare.

There are various differences between EPAs and LPAs which are not the subject of this article so I will refrain from listing them here. However, what is important to note is that since 1 October 2007 persons are no longer able to enter into EPAs, though those entered into before that date are still valid. In a bid to tackle concerns over the lack of safeguards involved in the making of EPAs, the Mental Capacity Act 2005 (“the MCA”) saw the introduction of LPAs and additional safety precautions which include:

1. The requirement that an LPA has to be registered at the Office of the Public Guardian (“OPG”) for it to be valid and the OPG will subsequently keep a public register of the same;
2. The option to insert preferences into an LPA, i.e. the things that a Donor would like their Attorneys to think about and consider when making decisions on their behalf;
3. The requirement that an independent certificate provider must certify the Donor has capacity to enter into an LPA; the Donor is not under duress; and there are no other reasons that the LPA should not be entered into.

Despite these additional protections, the potential for abuse remains. For example:

1. Gifts – under the MCA, Attorneys are permitted to dispose of the Donor’s property by way of making gifts on customary occasions, for example on birthdays or anniversaries, to persons (including the Attorney themself) who are related to or connected with the Donor if the gift is not excessive having regard to all the circumstances, for example the size of the Donor’s estate. Essentially, an LPA is based around trust and the legislation leaves that trust wide open for exploitation.
2. Payment for their role as Attorney – Attorneys can recover out-of-pocket expenses incurred in the course of acting as Attorney. Professional Attorneys are also able to charge for their professional services. Attorneys which are not professionals can only charge for their services if the LPA expressly provides for it. There have been numerous instances where Attorneys have paid themselves “salaries” in contravention of the legislation.
3. Conflicts of interest – Attorneys must not put themselves in a position where their personal interests conflict with their duties or where other influences affect the way in which they act as Attorney. For example, if the Donor lived in the Attorney’s home and the Attorney used the Donor’s money to carry out refurbishment of the property which was not necessarily in the Donor’s best interests, this would be considered a conflict of interest because essentially, the Attorney would be benefiting from this. Another example of this would be a situation where the Attorney buys himself a brand-new car to transport the Donor to and from hospital appointments.

Will the introduction of electronic registration of LPAs increase the risk?

From July until October 2021, the Ministry of Justice (“MoJ”) consulted on the modernisation of creating and registering LPAs so that the process can be carried out electronically. During the consultation period, 7 proposals were put forward including removing the requirement for a witness to be physically present to witness the Donor’s and Attorney’s signature; widening the powers of the OPG, and streamlining the current processes for objecting to the registration of an LPA.

The MoJ is now in the process of analysing responses and intends to publish its response in the Spring of 2022. If the proposals are adopted, it would remain to be seen whether the proposed safeguards will be sufficient to protect the Donor from fraud and other abuse.

What steps can be taken to minimise the risk of financial abuse?

When creating an LPA there are certain things you can consider to minimise the risk of financial abuse. For example, you could:

1. Appoint a professional Attorney – whilst there are costs involved with this, the professional will be regulated and under strict scrutiny
2. Steer away from a blanket authority to make all decisions – try to focus your decisions to specific transactions
3. Insert provisions - such as a requirement for the Attorney to lodge annual accounts and have a third party look over them

What can the Donor or third parties do if they suspect financial abuse?

Anyone who suspects that an Attorney is not performing their duties properly, or is exploiting or abusing the Donor, should bring it to the Donor’s attention. If the Donor still has capacity and is also of the view that the Attorney is abusing their position, they can sign a partial deed of revocation and serve a copy on the Attorney, the OPG, and any other relevant institution. This will allow the Donor to replace the Attorney with another individual. Alternatively, if the Donor no longer wishes to have an Attorney at all, they can sign a deed of revocation and serve it on the before-mentioned parties. This is something that the contentious probate team at Holmes & Hills can assist with.

Alternatively, if the Donor lacks capacity or they are oblivious to any wrongdoing, the concern should be reported to the Office of the Public Guardian (“OPG”), along with any evidence to support the concern. The OPG will then conduct an investigation and, at the end of that investigation, may take action against the Attorney involved. In some cases, this might involve the OPG making an application to the Court of Protection (“CoP”) for measures to protect the Donor. If the application is successful, the LPA or EPA will be cancelled and deputies will be appointed by the CoP to manage the Donor’s affairs. Similarly, if you have concerns about a co-attorney, you should raise them with the co-attorney first and, if it cannot be resolved, raise it with the OPG.

If you are worried that a loved one is being taken advantage of, Holmes & Hills can provide you with legal advice about any concerns you may have.