Powers of Attorney (PoA) (particularly Lasting Powers of Attorney (LPAs)) are, once again, receiving bad publicity in the press.

Previously criticised in 2017 for being too open to abuse by a former Court of Protection Judge, Denzil Lush, LPAs have come in for further criticism in a recent report by the Money and Mental Health Policy Institute (MMHPI). MMHPI was established by Martin Lewis in 2016.

The report revealed, among other concerns, that there is low awareness of how PoAs (among other third party management tools) can help those whose loss of capacity is temporary. For individuals who are aware of PoAs, very few considered they would be appropriate for their own circumstances; many considered that PoAs are primarily used to help families manage the affairs of people whose loss of capacity to make their own decisions is permanent.

Informal financial management is exposing vulnerable people to risk

Due to the perceived inadequacy of the current system to help people who suffer from episodic mental health problems, the report uncovered that too many are taking a risk. For example, they are giving other people access to their credit and debit card pin numbers in order to help them manage financially during periods of illness. This informal approach means that it is not just the person who is ill who is running the risk of financial abuse by an unscrupulous relative or friend; there are no safeguards in place to protect a genuine friend or carer who may be unfairly accused of exploiting a vulnerable person in the future.

The main worries expressed by respondents in the report were that LPAs are difficult to set up and use, delegate too much power to third parties, and give them too much access to information. The research highlighted the desire of the respondents to be able to pick and choose what information to share with a relative or friend, such as notification of when a bill is due, rather than give access to all their accounts. Likewise, they were keen for that person to keep an eye on their financial matters but not to make any decisions without consulting them first. In fact, however, setting up a property and financial affairs LPA is the safest, most legally compliant way for someone who temporarily loses mental capacity (for instance someone suffering from a psychiatric, as opposed to medical (such as dementia), illness) to arrange for a trusted relative or friend to help them manage all their financial affairs when ill.

Why set up an LPA?

It is worth remembering that if you have not authorised someone else to manage your affairs on your behalf, banks and other financial institutions, hospitals and other critical organisations will not be able to deal with anyone other than you. You can set up a third party mandate (essentially written permission for someone to act on your behalf) but if you want something more comprehensive, an LPA is the most practical solution.

You can only set up an LPA when you have capacity; it is too late to set one up if you have lost capacity. You have total discretion to appoint trusted individuals as attorneys under an LPA which means that, during those periods when you are temporarily incapacitated, your affairs will be managed by someone you have chosen. Without an LPA, if your relatives feel they need to step in to help you, they will have to apply to the Court of Protection which is an expensive, time-consuming process and gives you no say over who is appointed to act on your behalf.

How can I make an LPA work for me?

To allay concerns over an LPA delegating too much power to your attorneys you can, with the help of a professional, add clauses to the LPA form to help prevent any potential abuse. Such conditions could include various restrictions such as limiting gifts, or spending by attorneys. You could include a requirement to notify specific authorities (such as carers and care home managers) in the LPA registration process; or you could set up more than one LPA to deal with different sets of circumstances according to whether or not you have capacity at any given time.

Other ways of avoiding an LPA being abused is to draft letters of wishes and advance decisions so that everyone involved is quite clear about what you want to happen in the event of hospitalisation or other circumstance. Ultimately, if you have any ongoing concerns about the way in which your attorneys are using their powers under the LPA, the Mental Capacity Act 2005 provides the necessary legal safeguards and anyone can report attorney financial abuse of a vulnerable person to the safeguarding unit at the Office of the Public Guardian.

LPAs allow you to retain control

The MMHPI is campaigning to change the way PoAs and other tools can be deployed to help those suffering from temporary lack of capacity to manage their finances without entirely relinquishing control. With an LPA it is possible to achieve this outcome particularly if it is carefully drafted by an experienced professional. What is certain is that there needs to be much greater education of staff in various organisations dealing with people with mental health problems. Too many people, even in banks, are not fully up to speed with the powers conferred by LPAs, and other third party access mechanisms; nor are they fully familiar with what measures they can put in place to make life easier, such as sending a text message to a third party if a bank balance falls below a certain level. We would certainly support the MMHPI’s campaign to change the current system but would caution throwing the baby out with the bathwater. A well-drafted LPA, in conjunction with some carefully worded conditions, allows you retain some control when you are incapacitated, and within an established legal framework.

About the author

Tracy Ashby Senior Associate

Tracy is an experienced private wealth solicitor specialising in estate and wealth planning including advice on, and drafting of, wills and trusts, and inheritance tax and succession planning.