Lasting Powers of Attorney (LPAs) are invaluable tools to assist and support people in need, if they are used correctly. Unfortunately, not every attorney who agrees to act for a relative or friend fully understands the limitations on what they can do. We see a lot of caring and considerate attorneys who are caught out, not because they are trying to take advantage of their position, but simply because they haven’t appreciated exactly what they can and cannot do.
Many people assume that an LPA or other power of attorney provides an attorney with an absolute right to deal with a person’s finances as if the attorney had stepped into their shoes, but this is not entirely true. Common and everyday transactions could easily result in problems if not dealt with correctly.
Consider the following situation. A mother appoints her son to be her sole attorney under a property and financial affairs LPA. She remains mentally capable of dealing with her own finances, and makes a number of generous gifts to her son and to his children, to help them with their housing needs. The mother then suffers a serious stroke, and is left unable to make her own financial decisions. At the same time, her granddaughter is buying her first home, and her son transfers £25,000 of his mother’s money to this granddaughter. The son believes that as his mother has always made gifts to the grandchildren in order to help with their housing needs, and because she was not in financial need for her care costs, this transaction would be acceptable. He was only trying to follow his mother’s wishes and be fair to all of her grandchildren.
Whilst this will sound perfectly reasonable to many people, the son should not have made the gift without first obtaining the authority of the Court of Protection. Attorneys have very limited powers to make gifts, being allowed to:
• Make gifts on customary occasions to persons related to or connected with the donor; or
• Make gifts to any charity to whom the donor made or might be expected to make gifts.
“Customary occasions” include births, marriages, civil partnerships and “any other occasions on which presents are customarily given within families or among friends and associates”. This does not include making inheritance tax planning gifts, even if the donor was in the habit of making gifts of that sort when they had capacity, and attorneys can’t decide to use gifts as a mechanism to even out or balance up perceived unfairness in gifts made by the donor when they had capacity.
The Public Guardian’s practice note on gifts available online at https://www.gov.uk/government/publications/public-guardian-practice-note-gifts/public-guardian-practice-note-pn7-giving-gifts-web-version is very helpful in this regard, and sets out guidance on matters that an attorney should consider before making a gift from the donor’s assets. I would strongly recommend that attorneys read this practice note, as well as making sure that they read the LPA form carefully, and look at the relevant sections of the Mental Capacity Act 2005 Code of Practice https://www.gov.uk/government/publications/mental-capacity-act-code-of-practice Ignorance of the rules that apply is not an acceptable excuse if an attorney acts outside of their powers.
Partner in the Private Client department at Lodders, and head of the Care & Capacity team.
Sofia joined Lodders as a trainee in 2001. Her jobs before that included working on Saturdays at the haberdashery in Peter Jones and tending bar at the White Hart in Whitechapel.
Sofia is now a partner in the Private Client department at Lodders, and head of the Care & Capacity team. She advises clients on powers of attorney, Court of Protection applications, care funding, wills, and estate planning. Sofia also manages the financial affairs of people who are unable to do this themselves.
Sofia specialises in in the preparation and registration of enduring and Lasting Powers of Attorney, the appointment of Deputies and management of financial affairs, care funding and reclaiming care fees. She has a large variety of clients, although the majority are older and more vulnerable.
Sofia regularly present at seminars and events, and writes for publications on the work areas that she specialises in.