Are powers of attorney a risk?

Denzil Lush, a retired senior judge of the Court of Protection, has warned of the risks of powers of attorney and the lack of safeguards in the power of attorney system.

This has come in the wake of the story of Frank Willett who was exploited by his neighbour using a power of attorney. Frank lost everything – his money, his house, even his medals from 35 years in the service.

But what is a power of attorney and what is the alternative?

A power of attorney is a legal document that you prepare to appoint trusted individuals (‘Attorneys’) to make important decisions about care and finances on your behalf.

There are 3 different types of powers of attorney but the main one we are concerned with is the Lasting Power of Attorney (LPA). There are two types of Lasting Powers of Attorney – Health and Welfare (HW LPA) and Property and Financial Affairs (PFA LPA), which replaced Enduring Powers of Attorney in late 2007.

If you lose mental capacity and you do not have an LPA in place you will require a Court of Protection Deputyship. A Deputyship is a Court Order that appoints a suitable person/s (the ‘Deputy’) to make financial or health decisions on your behalf. There are two types of Deputyships – Health and Welfare and Property and Financial Affairs – however the Court rarely appoint a Health and Welfare Deputy.

The duties of a Deputy and an Attorney are very similar – they must both act in your best interest and in accordance with the principles of the Mental Capacity Act 2005; they must keep financial records and not make gifts outside their power. Attorneys are supervised by the Government’s Office of the Public Guardian (OPG). The OPG will investigate potential financial abuse by Attorneys and require them to produce accounts and records of decisions. The supervision of a Deputy is more stringent with the requirement for annual reports to OPG, although if the OPG investigates an Attorney they will also be required to produce full accounts. The additional security of a Deputyship is the requirement to maintain a security bond. This is like an insurance policy that will pay out if the Deputy has acted improperly.

The problem with Deputyships is the process to set them up. A Deputyship cannot be applied for until you have lost mental capacity. An application has to be submitted to Court with a £400 Court fee and potential legal fees to prepare the application. In addition, there are ongoing costs for the OPG supervision fee and premium for the security bond. The standard timescale for a Deputyship application is 4 – 6 months; during which period no one will be able to manage your finances. This can put additional strains on families who are potentially having to cope with other upheavals, such as care homes or a traumatic incident.

If you have lost mental capacity, your family will be left to decide who is the most appropriate person or persons to apply to be Deputy. If they can’t agree then potentially the timescale and the legal costs involved will increase significantly as you go through the Court process.

In comparison, an LPA must be prepared whilst you have the requisite mental capacity. It will be your wish as to who is appointed as your Attorney/s. There is a registration fee of £82 per LPA (an LPA must be registered before it can be used) and possible legal fees (lower than for a deputyship application)to prepare the LPA. The timescale to register an LPA is 2 – 3 months.

The problem with LPAs is that for the most part they are being treated as a simple form filling exercise and the power of such a document is being lost. This is being encouraged by the OPG, who in May 2014, launched its online LPA tool, which it claims allows people to create the documents without the need for professional advice from a solicitor. This leaves vulnerable people at risk of coercion or of giving wide powers over their financial affairs without understanding the implications. This risk is much reduced if you make an LPA with the help of a specialist, regulated professional.

A well-designed LPA should give your Attorneys the powers they require with the security you want. LPAs can be designed to include restrictions, instructions and supervisions; this is in addition to the safeguards already in place. Using a specialist lawyer will also provide you and your Attorneys with an explanation as to the extent of those powers and their limits and accompanying responsibilities. Whilst some financial abuse is malicious often the abuse occurs because of Attorneys not understanding their roles and duties.

Whether you decide to prepare an LPA or you have a family member that requires a deputyship, you should seek legal advice to ensure the document is suitably prepared and the Deputy/Attorney has an understanding of the legal duties they are taking on. Ideally, this should be from a lawyer with specialist qualifications such as STEP (Society of Trust and Estate Practitioners) and SFE (Solicitors for the Elderly).