Signing your financial life away

LPAs enable people to designate someone they trust to look after their affairs should the time come when they can no longer do so themselves. There are two types of LPA that can be used. One covers health and welfare issues, which includes decisions about medical treatment such as where and how you are cared for. The second type of LPA covers property and financial decisions, which enables the designated attorney to access bank accounts, pay bills or manage property on your behalf. 

There are many reasons why someone could choose to put an LPA in place. They might feel a time will come when they lack the mental capacity to make welfare or financial decisions themselves due to conditions such as dementia or depression. They could also be away travelling or in hospital on a long-term basis and need someone they trust to look after their financial affairs while they are away.

However, there have been incidences where people acting as attorneys have stolen money and property from the very people whose affairs they were supposed to protect. 

This has prompted Denzil Lush, a retired senior judge with the Court of Protection, to say people need to be made more aware of the risks associated with signing LPAs. He even went as far as to say he would not sign one himself. 

One recent case concerned Frank Willett, a Normandy veteran who appointed his neighbour Colin Blake as his attorney when he started suffering from dementia in 2003. Blake then used this power to withdraw large sums of money from Mr Willett’s account. By the time Mr Willetts’ daughter was able to revoke the power of attorney, all of her father’s money was gone, as were his army medals and his deceased wife’s jewellery. Blake was jailed for four and a half years in July. 

Mr Lush’s criticism of LPAs is concerning given that he has adjudicated approximately 6,000 power of attorney cases over the course of his career and is the author of the definitive legal guide in this area. 

Mr Lush believes that LPAs lack transparency and said that people should consider the alternative option of deputyship. This is where the Court of Protection appoints someone to look after someone’s affairs once they have lost mental capacity. He argues that these deputies are subject to stricter safeguards than attorneys. For example, deputies must send annual reports to the OPG to explain the decisions they have made – attorneys do not have to do this. 

Key Points

• LPAs enable people to designate someone they trust to look after their affairs.
• There are also significant drawbacks with deputyship.
• Should some kind of warning system be put in place?

Making LPAs more robust

While the deputyship regime does have more safeguards in place than LPAs, there are also significant drawbacks. The process of becoming a deputy is complex and there are substantial fees that need to be paid. The application fee is £400 and you will need to pay this twice if you wish to become both a property and financial affairs deputy and a health and welfare one. A new deputy will need to pay a £100 assessment fee and general supervision fees of £320 have to be paid annually. 

If you wish to be appointed as a property and financial affairs deputy then you must also pay a security bond, which is effectively a type of insurance that protects the finances of the person you are a deputy for. The amount the deputy pays depends on the value of the estate of the person they are deputy for as well as how much of the estate the deputy controls. 

This compares with the cost of registering an LPA, which currently stands at £82 for each power of attorney if you are in England or Wales. In Scotland it costs £75 to register a power of attorney while in Northern Ireland it is £115. 

There is also an issue of choice. When putting a power of attorney in place, the person chooses someone they trust to undertake the role and this decision is taken while the person still has the mental capacity to make that choice. While there have been some high profile cases where this trust has been misplaced, in most cases it does work.

Under the deputyship regime the deputy is appointed by the Court of Protection for someone who is already suffering from a loss of mental capacity. The person does not have any say over who is looking after their affairs and the Court of Protection may appoint someone the person would not have chosen themselves. LPAs do still have a role to play.

While abuses cannot be stamped out completely, more can be done to make the LPA system more robust. For example, having more than one person acting as an attorney would go some way towards improving the process. Having more than one attorney would mean that decisions are likely to be questioned more. If one attorney wanted to do something, they would need to run it by the other attorney first. As it currently stands, people can appoint more than one attorney – this should be made a requirement. 

Warning system

In addition, there is more that can be done to detect whether an attorney is acting inappropriately. For example, institutions such as banks could do more when dealing with people who have power of attorney. In the case of Frank Willett, his attorney withdrew almost £9,000 in one single bank transaction. This is despite the fact that when Mr Willett had been a regular visitor to the branch it was only to cash a weekly £70 cheque. 

Should some kind of warning system be put in place if uncharacteristically large amounts of money are being transferred by an attorney? A paper from the Money and Mental Health Institute reported that 71 per cent of respondents said they would find it helpful if a trusted friend was notified by the bank if there were noticeable changes in spending behaviour.

Such a system could go a long way towards preventing abuse as well as providing valuable peace of mind for friends and family, particularly if they live far away and do not have day-to-day contact with their family member and their attorney.

While the LPA system does have its challenges, I do not think they should be consigned to history just yet. In the majority of cases they do work well and if oversight of the attorney can be increased, they can continue to provide valuable protection.

Helen Morrissey is personal finance specialist at Royal London