How to ensure you don’t fall foul of LPA rules and are not accused of financial abuse
This week we’re going to take a look at the rules which govern the actions of an Attorney or Deputy when looking after the finances of a relative who has lost capacity.
The rules on how money can be used are very strict indeed. Many people unwittingly land themselves in trouble because they have not understood what they can and cannot do as an Attorney or Deputy.
Let’s imagine the following scenario:
Your mum has always doted on the grandchildren. When your son was little he used to love playing with toy cars and Granny always used to say: “When you’re older, I’ll make sure you have a nice car of your own to drive”.
Time passed and a few years ago she decided to put her affairs in order. She made out a Will, setting out how she wanted her estate to be divided up when she died. By all accounts, she even put aside financial gifts for each of her grandchildren – just as she had promised.
At the same time she put in place a Lasting Power of Attorney for both Finance and Health and Welfare, in the event that she ever lost mental capacity and was unable to make important decisions for herself.
Sadly, mum has now been diagnosed with Dementia. As her Attorney, it now falls to you to make all the decisions about her finances and care.
Your son has recently passed his driving test and would really benefit from a reliable car to get him to and from college. Granny had always promised him a nice car when he was old enough – so surely it’s okay to ‘gift’ him the money from her savings. After all, surely it’s what she would have wanted? And, in any case, he will eventually inherit this money when the time comes….
If we had a pound for every time we have heard this sort of defence from a worried Attorney or Deputy who is being challenged by the Office of the Public Guardian – well, let’s just say we’d have a very full piggy bank in our office!
Let us be absolutely clear – as an Attorney you CANNOT gift money in this way. Even if it’s what Granny would have wanted, even if she promised your son a ‘nice car’ – it’s a big no-no!
The rules which govern how an Attorney or Deputy can spend a Donor’s money when that person has lost mental capacity is contained in the Mental Capacity Act Section 12 and any gifting is strictly limited to ‘customary gifts’.
Court decisions have, over the years, defined an absolute limit of £3,000 a year. Most recently a Court of Protection judgment went further and made it clear that any gifting at all has to be made out of ‘excess income’, that is to say money that is not going to be required by the Donor for their own care needs.
This means that even modest gifts for customary occasions such as birthdays, christenings and Christmas should not be made until the Attorney or Deputy can satisfy themselves that these are gifts that were made customarily before the Donor lost mental capacity AND that the money they are going to use is not likely to be needed for the individual’s care and support.
Any Attorney or Deputy who makes gifts on behalf of a person whose money they are looking after would therefore be well advised to seek legal advice before doing so.
The Office of the Public Guardian views unauthorised gifting as financial abuse. It will, in extreme cases, seek to revoke the Enduring/Lasting Power of Attorney/Deputyship order.
Additionally, if a Deputy or Attorney makes an unlawful gift, they may have to personally repay that gift (even if the money has already been spent by the recipient) and they could also face a criminal prosecution.
At Steene Law, we specialise in acting for individuals who, as either Attorneys or Deputies, are being challenged by the Office of the Public Guardian.
Before you consider making a gift of a donor’s money – even if you believe it is what they would wish – call the team at Steene Law for a FREE conversation.
We will be able to tell you whether or not it’s permissible – so that you avoid the prospect of a future OPG investigation into your actions.
Call us now for a FREE conversation on 0203 653 0623“>0203 653 0623.