23 Aug 2017
Author: Stephen Breen
Last week a former Court of Protection judge poured scathing criticism on Lasting Powers of Attorney, concluding that he would never sign one himself. Instead, the Judge advised that people do nothing, so that if they should lose mental capacity, a friend or relative would have to obtain a court order. Are his criticisms justified and should we really leave our financial affairs to chance?
What is a Lasting Power of Attorney?
Nobody would like to think that they might lose mental capacity at some point during their lifetime but sadly, it happens to thousands of people every day. Both the young and old can be affected due to an accident, stroke, illness or degenerative condition such as dementia. In such circumstances, many people believe that their loved ones could step in to manage their finances but this is simply not the case. Government and financial organisations will not deal with your friends or relatives without proper legal authority and in some cases, even joint accounts can be frozen so that neither party can access funds.
The Lasting Power of Attorney (LPA) offers a simple solution. It allows you to nominate someone you trust to manage your affairs, should you be unable to do so. There are two types available – one for finance and property decisions and the other for health and care decisions.
The LPA for finance and property decisions is a very handy document as it can be used, with your permission, at any time once registered – which means your partner or trusted family member can help if needed temporarily, such as in hospital or on holiday. The LPA for health and care decisions can only be used if you lose mental capacity.
What are the risks?
The risk of making a Lasting Power of Attorney (finance/property) is that if you give this power to someone you don’t completely trust, they could abuse it. Logically, most people choose someone they really trust to act for them – but not everyone chooses wisely.
This is what happened to retired veteran Frank Willett, who made a Lasting Power of Attorney appointing his neighbour Colin Blake to act for him. Frank could – and perhaps should – instead of chosen his daughter Lesley who lived in South Wales, some 300 miles away. Alternatively he could have appointed Colin and additionally chosen another attorney – who could be a professional (paid) attorney. But in his early 80s and suffering from dementia, Frank was vulnerable and made an unwise decision.
Could Frank’s experience have been avoided?
It is difficult to comment on the circumstances surrounding Frank’s choice of his neighbour as his sole attorney without the full facts. However, it is safe to say that an experienced solicitor would certainly have questioned this decision and recommended the appointment of an additional attorney. Indeed, an experienced solicitor may have had doubts about whether Frank had the mental capacity to make the document in the first place, given his diagnosis of dementia and his unusual decision to appoint only his neighbour.
With a further attorney appointed, Frank would have then had the choice to allow his attorneys to make decisions together or separately. Given the lack of close family relationship with his choice of attorney, joint decisions would have been advisable.
Additionally, Frank would have had the ability to limit his attorney’s power in any way he saw fit.
Frank would also have had the opportunity to notify other relatives – including his daughter – on making the document. This is a valuable safeguard that alerts friends and family to the fact that the document has been made. Should someone then believe abuse is taking place, they can apply to the Court of Protection to intervene – and typically a no-tolerance approach is taken.
What is the alternative?
If someone loses mental capacity and there is no Lasting Power of Attorney in place, a Deputyship Order becomes necessary. Former Judge Denzil Lush was quick to sing the praises of such orders noting the £320 annual supervision fee as a small price to pay – but there are far more costs and hurdles involved in making such an order.
Like Lasting Powers of Attorney, there are two types of Deputyship Order – one for finance and property decisions and the other for health and care decisions. It’s worth noting that the Court is reluctant to make an order in relation to health and care decisions, unless there is a really good reason to do so – so an LPA for health and care decisions is really advisable.
It costs £400 in court fees to apply for each type of Deputyship order (so £800 for both types). There’s an additional £500 fee if a hearing is deemed necessary. After the order is made, there’s a fee of £100 to pay for each deputy and £320 a year supervision fees. There’s also an annual bond to pay which is typically in the region of £50 – £300. In addition to all of the Court’s fees, there are lawyers’ fees to pay which can run into the thousands.
However, the cost of obtaining a Deputyship Order, however significant, is perhaps not the single biggest reason to favour Lasting Powers of Attorney. The most concerning fact for most people is that anyone can apply for a Deputyship Order – and this might not be someone you trust. By contrast, you get to choose who has Power of Attorney if you should lose mental capacity.
Additionally it’s worth noting that a Lasting Power of Attorney is registered when it is made, so available for use straight away. By contrast a Deputyship Order takes months to make and in the meantime, no funds are available for your bills or care.
So what should I do: make an LPA or leave it to chance?
Around 2.5 million people have a Lasting Power of Attorney and the number is growing rapidly, at least in part due to the Government’s rigorous promotion of these legal documents. There is no official data on abuse cases but it is thought that they are relatively rare in comparison with the number of people who benefit from these documents. Most experts agree that in the vast majority of cases there is no abuse and it is therefore dangerous to scare people away from making this low-cost valuable legal document.