The recent BBC News report highlights a troubling situation where several elderly individuals had their bank accounts locked and cash withdrawn after granting power of attorney to a law firm partner. This situation underscores the importance of establishing trust, ensuring transparency, and adhering to strict ethical guidelines when managing the financial affairs of vulnerable individuals.
Responsibilities of legal professionals
A key issue at the heart of such cases is the responsibility of legal professionals when acting as attorneys under a Lasting Power of Attorney (LPA). When a person creates a Property and Finance LPA, the legal professional handling the matter must first assess whether the donor (the person granting the power) has the mental capacity to create the document and choose their attorneys. If the donor retains capacity, they have the right to appoint any person or entity, including the partners of a law firm or a firm’s trust corporation like Tozers Trust Corporation Limited (TTC), for example, to act on their behalf. TTC is made up of nine directors, all of whom work collectively to ensure that decisions are made with the donor's best interests in mind. Professionals must provide the client with an overview of their likely fees for assisting with their finances when the LPA is put in place, to ensure that the client understands the likely long-term costs before the LPA is registered.
One critical aspect of managing an LPA is ensuring that should the donor lose capacity; clear processes are in place to handle their financial affairs responsibly. Where TTC is appointed as a person’s attorney, The directors of TTC work to estimate the costs involved in managing the donor’s finances as soon as we become involved, so that this information can be set out clearly for them to understand. If the donor still has capacity, they are provided with the estimate and can choose to proceed accordingly. If the donor loses capacity, the directors of TTC, along with legal professionals, will consider the necessary steps and prepare client engagement paperwork that outlines the scope of the attorney’s responsibilities and the anticipated fees.
It is crucial to note that in such matters, decisions are not taken lightly. Legal professionals must not assume a donor has lost capacity without proper assessments. The law mandates that all decisions be capacity-specific, meaning that formal capacity assessments are conducted before making decisions regarding financial management. When a donor's capacity is in question, professionals involved in managing their affairs, such as case managers and care workers, work collaboratively to ensure decisions align with the individual’s best interests.
Transparency when handling financial matters
Transparency is another essential factor. Legal professionals appointed as attorneys are required to provide regular updates on costs, with estimates being reviewed annually and whenever the client’s situation changes, and monthly bills issued to allow for clear tracking of fees. Additionally, six-monthly cost updates are provided to ensure that the donor (or their attorney) is kept informed of the financial situation. This transparent approach minimizes the risk of any financial mismanagement or misunderstanding, which is critical for maintaining trust between the donor and the attorney.
Furthermore, legal professionals are expected to follow robust procedures when managing the donor’s property, such as obtaining multiple estate agent valuations before selling a property or arranging for professional property clearance. Decisions regarding the sale of valuable possessions are also made cautiously, taking into consideration both the donor’s wishes (if they have capacity) and their family’s input (if they do not). A clear process is followed, including the valuation of items to ensure fair prices are achieved.
Diligent oversight when handling finances
The article also highlights how critical it is to maintain diligent oversight in financial matters. For cases where TTC is appointed as attorney, we regularly check bank statements, record all transactions using accounting software, and require receipts for every payment made from the donor's accounts. In addition to the oversight by the legal team, the TTC's cashiers team also ensures that transactions are scrutinized, providing an additional layer of protection against financial abuse or error.
For donors who have capacity, they may choose to retain full control over their accounts, and the attorney only manages those accounts that the donor has explicitly designated. This safeguards the autonomy of the donor, ensuring they remain in charge of their financial decisions unless they choose otherwise.
Protecting vulnerable individuals
What this case illustrates is that while the legal framework governing LPAs, including the Mental Capacity Act 2005 and guidance from the Office of the Public Guardian, is designed to protect vulnerable individuals, there are still risks when the system is not carefully adhered to. When individuals trust professionals to manage their affairs, they rely on these systems to ensure that their assets are handled responsibly and transparently.
In conclusion, the case serves as a cautionary tale about the importance of safeguarding vulnerable individuals' finances when granting power of attorney. Legal professionals must adhere to rigorous standards, ensuring that all decisions are made in the donor’s best interests, with clear oversight and transparent processes. Only then can the potential for misuse be minimised, and the rights and well-being of those who are most at risk be protected.
How Tozers operate to safeguard vulnerable individuals
We’re members of both the Society of Trusts and Estates Practitioners (STEP) and the Law Society, meaning we’re at the forefront of best practice and adhere to regular auditing measures.
