Tag Archives: Property & Financial Affairs

Acting as a Financial Attorney

18 May

Considerations when acting as a financial attorney


When someone has appointed you to act for them, there are several duties that the attorney should fulfil.  The most important consideration is what is in that donor’s (the person for whom you are acting) “best interests”.


Firstly you must collate all the information, so that you can understand the situation.  How can you manage someone’s financial affairs when you don’t know what assets and liabilities they have?  The next thing is to work out how to manage those affairs going forward to get the best result for that person, whilst taking into account what they have done in the past.


So in the past they may have ethically invested and as long as this investment strategy is still going to provide a reasonable return, then that should continue.  However if that person gave away a big proportion of their income each month to someone who should be more financially independent, then continuing with this strategy is not appropriate.  The donor’s money is for them first, not anyone else.  The only extension to that is other people to whom they have an obligation to provide for, such as minor children.  That doesn’t mean that the donor cannot give gifts of any kind, but the gifts need to be for birthdays / Christmas / marriage etc, which is otherwise known as “on occasion”!  Importantly gifts need to be appropriate to the size of the estate.  It is considered to be in the best interests of the donor that their friends and family “remember them fondly”, but clearly within reasonable limits.  There can at times be a conflict of interest between the donor and attorney, if they are spouses or parent and child, because the more spent on care, means the less the attorney will inherit!  The money remains the donor’s, so the best interests of the donor, not the ultimate beneficiary is what is of paramount importance.


The next thing to ensure is that the donor is as well cared for and comfortable as can reasonably be managed, but clearly some of these decisions involve “caring” decisions, which are beyond the authority of the financial attorney, nevertheless whatever care is decided upon has to be paid for, which the attorney has the authority to deal with.


All the time, circumstances change, so for example on admission to a care home, that home might be able to meet that person’s needs, but 3 months later after a major deterioration, they may no longer be able to do so, in which case a new placement must be found.


Acting as an attorney can often be a lonely, difficult and thankless task.  If you are an attorney and you need help, please contact me, I will be happy to assist you.


Gift Giving by someone mentally incapable – Part 10

10 Apr

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Gift Giving by someone mentally incapable – Part 10


One key point with this set of blogs is that this is at all times about someone who lacks capacity to make gifts for themselves.


The Mental Capacity Act says that capacity to make each decision is specific to the time at which is needs to be made and to the complexity of the question.  Therefore a person may have capacity to make some simple decisions, but lack capacity to make complex ones.  All these blogs have been about someone who lacks capacity to make gifts and I haven’t differentiated about the size or complexity of the gift, they just have not had capacity, so someone else has made the decision.


But what about someone who does not lack capacity?  Firstly it doesn’t go with the title of the blog, but moving swiftly on from that point, if they have capacity, then the choice is theirs, no-one else can make that decision for them.  They can be persuaded and the persuasion may tip over into undue influence, which can be tricky to pick apart, but the decision is theirs.


The only restraint on gift giving is financial.  There are rules about means testing of benefits, so as long as the gifts don’t impact on the financial assessment of benefits, then there is no problem.  The individual may also have contractual obligations and the obvious ones are rent or mortgage, so as long as they can make those payments, then no problem.  Even if they can’t make the payments, they will find themselves subject to the debt collection protocols that are in place and may find themselves homeless or with bailiffs coming round, their choices led them to this place and the consequences are theirs, but it does not necessarily invalidate the gift, as long as their creditors are not prejudiced.


The individual can give everything they own to charity or their best friend or a total stranger, if they have capacity, then that’s fine, as long as they don’t then want to apply for means tested benefits or are defrauding their creditors.


Someone with capacity is allowed to make unwise decisions, we all do, some of them are little decisions and others are bigger, but they are still unwise.  How many of us have had one too many glasses of wine & had a headache the next day or one to many slices of cake & had to go up a dress size!!  We don’t live perfect lives and that’s fine, we are allowed.


When we make decisions for ourselves, as we appreciate the consequences, this often impacts on our decisions and we therefore make gifts appropriate to the size of our estate anyway, but what we do is our choice and we are free to make those choices.


Gift Giving by someone mentally incapable – Part 9

3 Apr

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Gift Giving by someone mentally incapable – Part 9


Following on from the case of DP, it is probably worth looking at the duties of an attorney, as indicated in that case.


The Court said that the attorney must act in accordance with the Principles of the Mental Capacity Act 2005, which are:

a)     A person must be assumed to have capacity unless it is established that they do not have capacity.

b)     A person is not to be treated as unable to make a decision unless all practicable steps to help him make a decision have been taken without success.

c)     A person is not treated as unable to make a decision merely because it is an unwise decision.

d)     An act done or decision made under this Act for or on behalf of a person who lacks capacity must be done or made in his best interests.

e)     Before the act is done or decision is made, regard must be had to whether the purpose for which it is needed can be effectively achieved in a way that is less restrictive of the person’s rights and freedoms of action.


The Court also said that the duty that the attorney must understand is that they can only make decisions when the LPA has been registered.  The Court went on to say that the attorney must act in the best interests of the donor, which is defined as:

a)               Working out a person’s best interests cannot be based on their age, appearance, condition or behaviour.

b)               All relevant circumstances should be considered when working out someone’s best interests.

c)               Every effort should be made to encourage and enable the person who lacks capacity to take part in making the decisions.

d)               If there is a chance that the person will regain the capacity to make a particular decision, then it may be possible to put off the decision until later if it is not urgent.

e)               Special considerations apply to life sustaining treatment.

f)                The person’s past and present wishes and feeling, beliefs and values should be taken into account

g)               The views of other people who are close to the person who lacks capacity should be considered, as well as the views of an attorney or deputy.


The next part that the Court drew attention to was that the attorney needs to understand that they can only make gifts to charities or on customary occasions and for reasonable amounts. (which is the s.12 authority).


Finally the Court pointed out in the case of DP that the attorney (and all attorneys, not just this one) had a duty to keep accounts and financial records and produce them to the Office of the Public Guardian and/or Court of Protection on request.


Whilst the attorney in this case had done some of these things, in that DP was in care, her fees were paid and she was receiving a regular personal allowance, lots of it was adhered to, so hence the LPA was revoked.


Gift Giving by Someone mentally incapable – Part 8

27 Mar

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Gift Giving by someone mentally incapable – Part 8


There has been a new case – known as DP, which was decided on 11 February 2014.  In the case, DP (the person with dementia) had distant family; she was widowed and had no children.  She moved into her house from London in 2005, where she met JM, who became her gardener.


In August 2011 she made her last Will, giving 10% of the proceeds of sale of the house to Brookwood Cemetery and 10% to the Russian Orthodox Church (as she had been a member of the Russian Orthodox Church for decades).  The rest of the proceeds of sale and the remainder of her estate she left to JM!  It was later argued that she may not have had capacity to make this Will.


Then in October 2011, she made an LPA appointing JM to be her sole attorney and got friends to act as the two certificate providers to say that she understood it and was not acting under undue influence.


JM asked the Financial Ombudsman to investigate the advice of her financial advisor and as a result of this investigation, she was awarded £38,606.32, however Aviva were worried about financial abuse, so effectively froze the account.  JM sold the house, as the Aviva account was frozen and deposited the proceeds into a bank account in his own name, but when he realised he was being investigated, he put the funds into DP’s name.


JM then proceeded to make a series of gifts to himself, which included £38,000, additionally he was unable to explain a bankers draft for £1,500 or cashpoint withdrawals for £8,520.  He claimed he had spent money on home improvements, but was unable to produce receipts.  He had claimed for himself £20 per day salary for “house clearance and rubbish removal” for a year and £20 per week for gardening, also for a year.  Additionally he withdrew £55 per week, to fund his wife’s motability car and funded the petrol with payment of £10 every 2-3 days.


This issue about these “salaries”, is that DP had not completed the section of the LPA regarding paying her attorney and as such, he was not entitled to payment for his services.  If he had wanted to receive a salary for non attorney work, ie the gardening & house clearance, then he should have applied to the Court of Protection, who may well have granted it, if it had been reasonable, the gardening probably was, the house clearance probably wasn’t, but it would be dependant on the exact details of the case and this was never put before the Court to decide, so we will never know!


The Court investigated and he wanted to keep the motabiltiy payments going, as without them he claimed he would not be able to visit.  The Court is never persuaded by this kind of argument.  His wife had forfeited the £55 p/w of her motabilty payment for the car and it was not the role of DP to compensate her for this financial loss, nor should DP fund the petrol.


JM had taken care of her and had made sure that she was in a care home, that the fees were paid and that she was receiving a personal allowance.  However the Court decided that had had contravened his authority and had acted in a way that was not in DP’s best interests, so revoked the LPA and asked for a Panel Deputy to be appointed instead.


The Court went on to say that as the house had had to be sold, one of the first tasks for the Panel Deputy to do would be to apply to the Court of Protection for a statutory Will to make sure that Brookwood Cemetery and the Russian Orthodox Church still benefited from her estate in due course.


Gift Giving by Someone Mentally Incapable – Part 7

20 Mar

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Gift Giving by someone mentally incapable – Part 7


I’ve covered a lot of ground in the earlier blogs, so the only other thing that I can currently think to add on the issue of gifts is the point relating to the estate on death.

If someone has a Will or even if they don’t then it is helpful if the Attorney or Deputy has some knowledge of what is says.  The Will might just say something like “everything divided equally between my children”, so whatever the estate consists of, however big or small it is, there is a place for it to go on death (assuming the children are still alive!).

The rules of intestacy (when someone doesn’t have a Will) divide the estate between some specific family members and who they are will depend on what family members are living at the date of death.  I won’t go into those details here; they can be complex to explain.

But what happens if the Will says “my diamond ring to my daughter” and the ring is sold by the Attorney, what does the daughter get then?  Usually nothing, the gift will fail, so the daughter might be somewhat annoyed and hence the purpose of some kind of knowledge about the contents of the Will would be helpful.

Solicitors are often reluctant to disclose a full copy of the Will to the Attorney, if they don’t already know it and they feel that they owe a duty of confidentiality to the individual right up until their date of death, when that duty passes to the Executors.  But that should not prevent them making the point that there is a gift of the diamond ring to someone and that therefore the ring should not be sold in order to protect the ultimate wishes expressed in the Will.  They don’t have to say who the ring goes to, just that there is a gift to someone, thereby hopefully protecting the ring from loss or sale.

Lots of family members I’ve met come to me with a copy of their parent’s Will, so they know exactly what the gifts are, but that is not always the case.  So the decision to disclose relates to s.5 Mental Capacity Act, where someone is acting in the best interests of the person who lacks capacity.  Therefore whoever is choosing to disclose some or all of the contents of the Will have to balance what is in their best interests with their duty of confidentiality, which is why the compromise to disclose just the things that are specific gifts is likely to be in their best interests, whilst still maintaining confidentiality with the rest of the contents of the Will.

Sometimes it is not always possible to keep everything that is ultimately going to be gifted, if there are for examples lots of gifts of furniture and the individual is going into care.  Then it may be that those gifts are made early, especially if they are personal possessions, as they are not taken into account for care fees, so the gift of them cannot be a deprivation of assets.  This would mean not just disclosure that there is a gift, but to whom the gift goes.

It is highly likely that this would be considered acceptable in terms of s.12, as fulfilling their ultimate wish would be considered in their best interests; it is just an issue of timing!  Whilst this could lead to dispute by someone who wanted these gifts, if they weren’t given them in the Will, then they wouldn’t get them later and the dispute could always arise then.

Gift Giving by Someone Mentally Incapable – Part 6

13 Mar

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Gift Giving by someone mentally incapable – Part 6


In the first 5 blogs I’ve gone through some cases, then s.12 Mental Capacity Act and gifts by Deputy, finally I’ll turn to gifts by Attorney of a Lasting Power of Attorney (LPA) (or an Enduring Power of Attorney).


There is guidance issued by the Ministry of Justice and the guidance is that if there is any provision in an LPA about gifts, then the Office of the Public Guardian (OPG) will send it the LPA to the Court of Protection to have the provision severed.  Which all seems a bit contradictory, as s.12 Mental Capacity Act says season gifts to connected persons (or charity) that are reasonable are acceptable!  However the OPG do have powers to investigate the estate and therefore don’t know if this LPA relates to someone who has very limited assets or is a multi millionaire!  So the OPG err on the side of caution and sever all provisions about gift giving, just in case there are not enough assets to be able to make any gifts.


So when drafting an LPA, don’t put in any provisions about gifts, they’ll just get severed.  That does not defeat the statutory provisions of s.12 MCA, they still stand, even in the event of a severed provision in an LPA (even if the severed provision is about s.12!!).


We are therefore really in the same place as gifts by Deputy; they have to comply with all the conditions set out in s.12, which are the same as already discussed.  Any gifts must be reasonable, on seasonal occasion and to family or charities that the person would have given gifts to.  Very importantly, they must be reasonable in value in relation to the size of the estate, this is probably the most important bit of what they must be reasonable in relation to.


Any gifts, loans or transactions that are in some way questionable that do not comply with s.12 should not be done without an application to the Court of Protection to approve them and the application should be made before, not afterwards, the Court is not so keen on it happening that way round!  But as discussed, this is at significant legal cost, so should not be undertaken lightly.

Gift Giving by Someone Mentally Incapable – Part 5

6 Mar

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Gift Giving by someone mentally incapable – Part 5


In the first 4 blogs I’ve gone through some case law and then s.12 Mental Capacity Act – so the next thing to talk about is gift giving by Deputy.


Deputies are like Court appointed Attorneys, that is not exactly what they are, but that is probably the easiest way to think about them.  The Court of Protection, via the Office of the Public Guardian (OPG) have a role in monitoring them, to make sure that the Deputy is doing what they should do.  There is a bond in place, which covers the value of the estate, so that if the Deputy absconds with some or all of the person’s (they are called a patient) money, then the Bond will give them the money back and pursue the Attorney to try to get it back.  There is also a Court Visitor, who will visit the individual to make sure everything is fine and finally the Deputy must submit accounts to the Court each year.  All of these things cost money, which is paid for from the patients funds, so it is always far cheaper to have a Lasting Power of Attorney than to obtain a deputyship order, as the LPA has none of these after costs.  In all cases though the OPG can investigate and refer the matter to the Court and the Court has the power to revoke both an LPA or Deputyship order.


Anyway, having discussed what a Deputyship order is, back to giving:  In standard Deputyship orders there is usually a clause that says something like “the Deputy (without any further order from the Court) make gift of a seasonal nature to persons who are related to the patient and the Deputy may make gifts to any charity that the patient made or might be expected to make, provided the gifts are not unreasonable in all the circumstances and in particular to the size of the patients estate”.  This clause is a basic paraphrase of s.12.  I’ve seen in some older ones specific limits on how much the gifts should be or at least how much they should not exceed in value, but the Court doesn’t do that any more, as they now retain the flexibility of the “it should not be unreasonable” concept!


One point to remember is that an application to the Court of Protection for a significant gift is expensive and is likely to cost not less than £10,000 in legal costs and more if it is contested.  There would be an applicant to the Court, ie the person asking for the gifts to be approved (this is likely to be the person who received the gift/s).  When an application like this is make, the Court usually appoints the Official Solicitor to act for the patient, and both the applicants legal fees and the Official Solicitors fees are likely to be taken from the patients funds.  The Court is well aware of this and would therefore take a view of the balance between a slightly over generous gift, against the cost it would take to have that gift approved – which is the bigger loss to the estate?  If they gift/s were too generous, then this should be picked up in the accounts and by the Court Visitor, so that it does not continue unchallenged for years.


So it is clear that gift giving is possible, but it should not be on the generous size and should comply with all the points of s.12 Mental Capacity Act.