How energy of legal professional may be abused by chance with ‘presents’ and ‘bills’

Setting up power of attorney is an important way to plan for a time when you might be unable fend for yourself any longer.

People can appoint a legal or other professional, though most ask one or more close family members or friends to look after their finances if they fall ill.

Taking on power of attorney for someone else is a very responsible role, and sadly things can go wrong if those chosen turn out to be untrustworthy.

Suspected abuse can be reported to the Office of the Public Guardian, the arm of the Government which runs the attorney system. Unfortunately, it saw a 28 per cent increase in investigations to nearly 3,650 last year.

The Step body of inheritance advisers, which recently launched a ‘spot the signs’ campaign, tells us it is not uncommon for its members to see cases of ‘unintentional’ as well as more purposeful financial abuse.

‘Signs of such abuse can include small amounts of money disappearing from bank accounts that are not accounted for,’ says the organisation’s technical counsel Emily Deane.

‘Attorneys may believe that they are entitled to reimbursement for their time or effort helping a family member, but it is still financial abuse.’

Deane says this can happen when people do not understand their responsibilities as attorneys.

Problems can also arise if you share attorney duties and suspect the other holder of abusing their position.

If you know about wrongdoing by a fellow attorney, you have a duty to act or you could get in trouble too.

Deane says 70 per cent of Step’s UK members, including solicitors and financial advisers, reported in a survey they had seen cases of actual or suspected financial abuse during the course of their work.

She says professionals are well placed to identify abuse and can play a vital role in prevention – although with dementia on the increase, more people are now at risk.

Below, we look at the dos and don’t of being an attorney, how boundaries can sometimes get crossed inadvertently, and how you can protect your loved ones from falling victim.

Accidental abuse: ‘Gifts’ or ‘expenses’ people think are justified

Financial abuse by power of attorney holders is more common than people realise, according to partner at law firm Freeths and Step member Louise Lewis.

She says it may take many different forms, but can start when an unscrupulous family member, friend, or fraudster tries to force a vulnerable person into appointing them as their attorney in the first place.

Coercion can also occur when someone close to the donor exhibits controlling behaviour, and may restrict them from seeing certain people.

However, Lewis adds that abuse may be unintentional, and come about accidentally.

She gives the following examples that she has seen during her work as a lawyer.

– A friend of a client suddenly appeared in their life, and pressed for power of attorney to be changed to appoint them instead.

A subsequent visit to the client by Lewis in person revealed that they did not want to make this change.

– An attorney for a deceased person deliberately and knowingly took money for her own benefit during the deceased person’s lifetime.

Lewis’s firm Freeths proved the attorney had gifted herself over £80,000. This discovery led to the attorney being prosecuted for fraud, and the money had to be repaid.

– Unintentional (or accidental) abuse is increasingly being uncovered, with ‘gifting’ coming up time and again.

Lewis says in one case the children of a deceased person discovered that the attorneys, who had been appointed to act for the deceased during their lifetime, had been making regular withdrawals from the bank account to cover what they highlighted as expenses.

This included meals out for their families. They cited this as gifting. This gifting, however, was not in line with the deceased’s normal pattern of behaviour.

Lewis adds: ‘Some attorneys may think “the estate is coming to me anyway, so it doesn’t matter”, but it does.

‘Section 12 of the Mental Capacity Act is very clear that any regular gifting by an attorney may only be that which is reasonable having regard to the donor’s estate. A lack of understanding of this law is not deemed acceptable as an excuse.’

‘Small treats add up, become a trail of payments… suddenly, it’s a pattern of financial abuse’

‘Unintentional financial abuse can take place when attorneys think that they can be compensated financially for their time by the donor, especially if they have taken on the role of carers,’ says Heledd Wyn, partner at Rothley Law and a Step member.

‘However, only reasonable, proportionate expenses can be reimbursed, and in some cases only by court approval. The rest must remain unpaid.’

Wyn explains that attorneys cannot simply act in the way they would if they were managing their own money, or even in the way the person who has now lost capacity to act for themselves was managing their money in the past.

Once someone loses capacity, the provisions of the Mental Capacity Act and its code of practice apply, so the bar on what is allowed is set much higher, she says.

‘For example, attorneys often don’t realise that they cannot simply carry on making gifts of money on behalf of someone who has lost capacity unless it is reasonable, proportionate, and often only when the court approves.

‘Small treats add up. A few meals out or little gifts here and there quickly become a trail of payments that are outside a donor’s normal habits. Suddenly, it’s become a pattern of financial abuse.’

Wyn says this is a complex area of law, and in many cases unintentional abuse does not occur out of malice but out of a lack of understanding.

‘Sometimes people just don’t get it right,’ she says. ‘What seems like it is possible might not actually be permissible so sometimes getting advice on what you can and can’t do ahead of time can save a lot of hassle, aggravation and money!

‘Planning versus crisis management is crucial in these circumstances. However, if it is a crisis, these things can often be fixed. For example, money can be repaid or retrospective court approval sought.’

Wyn gives a rundown of when court consent is required if you want to take action below.

Provide for the financial needs of those people the donor might be expected to provide for – Not usually

Make birthday, wedding and Christmas gifts (small gifts) – Not usually

Execute a will for the donor – Court’s consent required

Make gifts other than small, customary ones – Court’s consent required

Execute a Deed of Variation on behalf of the donor – Court’s consent required

Transfer a property to a family member – Court’s consent required

What are the dos and don’ts of being an attorney

Inheritance body Step’s ‘spot the signs’ campaign provides the following guidance to holders of power of attorney.

Always act in the best interest of the vulnerable person

– Prioritise the needs and preferences of the person whose finances you are managing

– Consider the beliefs and values that would have influenced their approach to a decision

– Seek to enhance their quality of life and maintain their independence as much as possible

– Maintain accurate, detailed, clear records of all financial transactions, including receipts, bank statements, and invoices

– Document any changes you make on their behalf, explaining why they are in the vulnerable person’s best interest

– Keep open lines of communication with the vulnerable person (if possible), their family or other people of interest

– Provide regular updates on their financial status, especially for larger than normal expenditures or changes in investment strategy

– Consult financial advisers, legal professionals, or other specialists if you encounter unusual or complex financial decisions

– Familiarise yourself with any legal duties and limitations associated with managing someone else’s finances

– Protect sensitive information to prevent identity theft or fraud, and only share information on a need-to-know basis with trusted professionals or family members, as required

– Develop a budget that considers the vulnerable person’s ongoing and future needs, such as housing, medical care, and personal expenses

– Regularly reassess the budget and adjust it if the person’s circumstances change

– Plan for potential future care costs, especially if the vulnerable person has a degenerative condition

– Allocate funds conservatively to ensure they have sufficient resources for the rest of their life -you may want to consider a care annuity

– If you have concerns about how someone is being treated, it is better to be safe than sorry and contact the relevant agencies who can protect them

– If you suspect anyone is exploiting the vulnerable person, report this to the relevant authorities – be vigilant and proactive in protecting them from scams or manipulative behaviour

– Proceed with caution – it could be unhelpful to tell someone with mental ill health that they have been a victim of financial abuse if they might tell the perpetrator

– If the person can participate safely, consult them on major decisions to honour their dignity and autonomy

– Be sensitive to their preferences, even if they cannot fully grasp complex financial details

Do not use someone’s money for your personal benefit

– Do not borrow or spend their money for your own use, no matter how small the amount, as this constitutes a breach of duty and could be illegal

– Maintain a clear distinction between your own finances and theirs.

– Avoid high-risk investments that could jeopardise the vulnerable person’s financial security, and prioritise stable, low-risk options to preserve their funds

– Don’t overlook essentials like healthcare, home upkeep and daily living needs to save money

– Balance cost-saving measures with ensuring a high quality of life for them.

– Avoid delaying or missing payments for housing, utilities or other essential expenses that could negatively affect the vulnerable person

– Do not alter the person’s will, pension or insurance beneficiaries, or any other estate plans, without proper legal authority, as unauthorised changes may be contested later and can cause legal complications

– Refrain from pressuring a vulnerable person to make decisions they are uncomfortable with or cannot fully understand, and approach financial discussions with patience and empathy

– Consider and apply for any benefits, grants or financial assistance programs available to the vulnerable person, as missing out on such support could mean a loss of essential financial resources

– Don’t disclose any financial information to friends, family or others who do not need access, and only share sensitive data with trusted individuals and professionals involved in someone’s care

= Avoid a ‘set-it-and-forget-it’ approach and instead regularly review the financial strategy and adjust it as needed

– Being vigilant isn’t being nosy, so consider how life changes, inflation, or new expenses may impact someone’s finances over time

= Never assume you know what someone would want without consulting them or their documented preferences

– Always defer to any existing wills, advance directives, or previously expressed wishes or instructions