The author notes that LPAs are often compared with insurance policies where one only needs to pay one premium to be covered but, as with all insurance policies, the devil is in the detail.
The following article examines the area of lasting powers of attorney, a feature of the English common law system. This news service has written before on the topic here and here. There continue to be calls to reform the LPA system to prevent abuses. With cognitive decline, such as dementia and Alzheimer’s, being major issues in ageing populations, the LPA issue is unlikely to go away. And the subject also highlights the duty of care that wealth managers have to clients in their role as trusted advisors.
Martha Swann, associate at Wilsons Solicitors, discusses this topic. The editors of this news service are pleased to share these views and invite responses. The usual editorial disclaimers apply. Email email@example.com
In today's political climate, it always gives one a slight shudder to read "Ministers have set out plans to transform [insert new project/target here]".
Inevitably it feels like an episode of the TV drama The Thick of It with politicians trying to home in on the least in need of reform items on the agenda (anything else being far too big a project to even contemplate).
Today's reform subject is Lasting Powers of Attorney. You may have heard of them, or you may be familiar with their predecessors (Enduring Powers of Attorney – they're still valid if already correctly executed – but maybe take advice if you're not sure if yours is going to be fit for purpose moving forward). Either way, LPAs are very useful documents in the right context, allowing named individuals to act on behalf of others who are unable to do so for themselves, because of mental or physical impairments (also useful if you need someone to step into your shoes and pay your bills whilst you sail off on a long cruise – which seems slightly less morbid than the alternatives).
The [UK] government is proposing moving the LPA application process completely online, bringing it in line with other legal processes already available in this way. For those who would find an online process unworkable, the paper application process will remain in place to provide complete flexibility. The government has engaged with relevant charities acting on behalf of older/vulnerable people along with the Law Society and the National Mental Capacity Forum when looking at updating the LPA format as it currently stands.
Currently, the LPAs can be made by anyone without any real checks on who they may be appointing or why. As much as I do not wish to talk myself out of work, you do not need to involve a solicitor to make an LPA. However, that also means that very persuasive people can help potentially vulnerable individuals make one, too – with very limited oversight beyond the document itself being registered with the Office of the Public Guardian ("OPG") once it is signed.
The reforms claim that there will be more robust checks when an LPA is made through its new online process. For example, there are new requirements for identification documents to be uploaded by all individuals named on the LPA. At present, attorneys are not required to provide additional identification to anyone.
Other positive attributes being ascribed to the new process are:
(i) Modernisation and safeguarding LPAs and their preparation and registration process for the future;
(ii) reduction of errors from donors (ie the individuals making the LPA for themselves) and attorneys and the ability for the OPG to deal with and rectify errors much earlier in the process. At present, an LPA can be rejected for various reasons by the OPG and will have to be completely re-signed by everyone, which can be onerous, costly and time consuming, especially when there is a degree of urgency – many people do leave making these documents to the last minute; and
(iii) environmentally, reducing the 19 million pieces of paper being sent to the OPG annually – this is an enormous carbon footprint which obviously needs reducing.
All very admirable, I am sure you will agree. Processes do need to undergo regular review to ensure that they are still fit for purpose, especially in an increasingly computerised age where some areas of our lives remain very firmly analogue. That said, I am not sure whether these reforms go far enough to ensure that vulnerable people are protected.
An online platform is a welcome development as it makes the LPA creation and registration process quicker and cheaper. However, it will still not fully protect vulnerable people from abuse and fraud where people are looking to take advantage.
Although additional ID verification for attorneys is a step forward, fundamentally that does not give enough information about that person's suitability for the role. The financial LPA alone gives an attorney (subject to any restrictions or guidance put into the LPA itself by the donor) full access to someone else's financial life – bank accounts, investments, property. All can be managed, sold, transferred, dealt with completely by the attorney. Surely such a powerful position should require additional checks before someone is let loose on someone else's finances? Even though someone might want their adult child to be their attorney (because it's their child – very common to just assume that your children are always the best person for the job), what if that child had previously been through bankruptcy procedures, or been charged with fraud?
The LPA could still be registered and used by that person if appointed as an attorney. Surely a simple criminal record check would also be appropriate under these circumstances? The highest rate of financial abuse is from family members appointed as attorneys (and I have seen this myself).
There should also be additional safeguards such as notifying someone else (known to the donor but not appointed) about the LPA being made, so that someone is on notice that the attorney is acting in that role. There was an obligatory notification process until 2015, but that is no longer the case. (I had heard about people sending the notifications to individuals in 10 Downing Street, simply to get around this hurdle, but for some this could be an incredibly valuable safeguard.)
Deputyships are put in place where someone has lost capacity and can no longer make an LPA for themselves. The court will appoint a deputy (who will have to make an application to the court to be appointed). There is a requirement for that deputy to account to the Court of Protection annually and produce a financial report.
There are currently no annual checks for appointed attorneys – I would assume the logic is that the person was appointed directly by the donor so (unless proved otherwise) the assumption is that person is trustworthy and will be acting properly. Unfortunately, there are still high numbers of cases of financial abuse, so how is merely increasing the identification requirements for the attorney going to resolve this?
Acting as an attorney is not an easy task. It is complex and difficult to make decisions on behalf of someone else. You do not constantly second-guess yourself when making your own decisions, but any right-thinking person wants to do the right thing when acting for someone else (and must always have the donor's best interests at heart – which is codified in the Mental Capacity Act's Code of Conduct) and that is a heavy burden. It is hard enough without adding additional reporting into it, surely? But the issue is that those who incapable of managing their own affairs need to be looked after as much as possible, and many people take advantage of such a powerful position. There is no ongoing oversight of attorneys unless someone raises a concern.
As stated above, it is possible to add instructions and guidance into the LPAs. Perhaps it would be appropriate in some cases for the donor to add an instruction that their attorneys produce annual accounts for independent scrutiny, so that there is supervision built into the document when it is created. The OPG can only do so much without restricting how flexible these documents need to be, so (as things currently stand) the onus is on the donor to ensure that it is right for their needs.
We have an ageing population, and the creation of LPAs is going to continue apace as people face up to concerns about losing mental capacity in the future and wanting to protect themselves. The government is right in wanting to modernise the process to make it easier and safer for donors. However, perhaps they have not gone far enough. I have seen LPAs in all their manifestations since they were introduced in 2015 and we shall see how the new process pans out. But do talk to a professional if you are thinking of making an LPA. Whether an LPA is produced online or via the paper forms, the results will be the same.
It may seem costly and onerous to talk to a solicitor but there is value to be had. If a donor is considering appointing an attorney to be involved in all aspects of their lives, surely it is crucial to ensure that the power being given away is not abused and the donor is protecting themselves. LPAs are often compared with insurance policies where you only need to pay one premium and you are covered but, as with all insurance policies, the devil is in the detail, and you want to make sure that the small print is absolutely fit for purpose.