Sensible planning can minimise LPA risks

Any risks of abuse with Lasting Powers of Attorney (LPA) could be reduced with greater accountability, a lawyer specialising in services to the elderly says.

People appoint attorneys through an LPA, a legal document, to manage their finances when they cannot do so, through age or incapacity, and attorneys have greater freedom than deputies appointed by the Court of Protection (CoP), says chartered legal executive, Michelle Cruddas of Harrowells' Private Client Department.

As the reporting safeguards with being a CoP deputy create more costs, in a period of financial uncertainty, more people are choosing LPAs - but they can take straightforward steps to reduce the risk of financial abuse, Michelle Cruddas adds.

Her comments follow those of retiring senior judge in the Court of Protection, Denzil Lush, who says he would never sign an LPA and warns, in a new forward to his definitive guide to this area of the law, that most people are unaware of the risks which, he claims, stem from a lack of transparency that creates suspicion and leads to bitter family disputes.

A total of 2.5m LPAs are currently registered in the UK and almost 650,000 new applications were made in 2016. The figures coincide with a Brunel University report, also from 2016, which found there is no systematic collection of official data on financial abuse, despite local authority safeguarding returns indicating it is the third most common form of abuse of the elderly.

Court of Protection deputies face greater scrutiny, as they must provide a full list of assets, annual accounts, and a security bond, which can be forfeited if money is spent inappropriately. Although appointing a deputy costs more than an LPA, Mr Lush says the annual £320 fee is worthwhile for the security it provides.

Michelle Cruddas, who says that the vast majority of LPAs work “perfectly well” adds: “I have seen people choose an LPA because of the CoP fees. There are some risks with LPAs, which could be reduced with greater accountability but this may lead to additional charges, which most clients are keen to avoid, if attorneys had to report to the Public Guardian in the way that deputies do. 

“One potential difficulty is that it is now easier to not involve anyone else in the LPA process because there is less onus on giving notice to a third party when registering the document. This increases the possibility of selecting an unsuitable attorney because others may not be able to object at the registration. However, whether there is actually a risk, depends on who is appointed.

She says:  “There are practical steps which people can take to reduce the risks. These include appointing in a calm and unhurried manner, well before an attorney is needed; taking thorough and timely legal advice, and revisiting the LPA document regularly to check it still meets the requirements. We often see people making an LPA at the same time as a Will, which is ideal as both plan for the future.

“Another is that the client could place a condition on the attorney to provide an account or sight of bank statements to a nominated, responsible third party, a professional person, friend or relative who is unable to act as attorney but who will provide additional scrutiny and supervision without the client having to pay additional court fees.”

Michelle Cruddas says she does not simply draft an LPA document from the client’s initial comments. “We see clients on their own, rather than with friends or relatives, and discuss their attorney choices and whether a different option may work better” she says. 

“We can also explain the duties and responsibilities to an attorney, and the risks of not managing finances properly, so they understand what they are taking on.”

Michelle Cruddas adds that LPAs are popular because people have highlighted the disadvantages of having a CoP deputy, including the fees, supervision costs and bureaucracy.

She adds: “While these are valid points, extra supervision is no bad thing.  There may be cases where a person cannot decide who is appropriate or not have anyone suitable to appoint. In such cases, having a deputy appointed after they have lost mental capacity, may be beneficial because the person would be under court supervision.”