Most people will have been scandalised to learn of how Dunkirk veteran Frank Willett was swindled out of his life savings by an unscrupulous neighbour who Frank had made his attorney to look after his affairs when he was in the early stages of dementia.
What’s equally worrying is that Frank’s case is by no means unique and, while powers of attorney are normally granted to family and trusted individuals so are (hopefully) in safe hands, there remain many who could be at risk.
So what is a power of attorney?
Simply put, it allows one or more persons to make financial decisions on your behalf.
Crucially, you must still have mental capacity to make your own decisions when putting in place a power of attorney. There are three types of power of attorney; Ordinary (OPA), Lasting (LPA) and Enduring (EPA).
An OPA can be used as a temporary measure while you are incapacitated or in hospital, for instance; this type can only cover financial and property matters. The EPA was replaced by the LPA on 1 October 2007; however, if you have an EPA it should still be valid.
An LPA is a comprehensive solution.
There are two forms of LPA, one handling health and welfare issues when you have lost the mental capacity to make these decisions yourself and one covering property and financial affairs such as buying or selling a house, making investments and paying bills.
Once you have chosen who you want to be your attorney or attorneys, you will need to fill in the appropriate forms, pay a fee and register it with the Office of the Public Guardian.
Frank Willett was swindled because the EPA he gave to his neighbour had insufficient checks and safeguards and by the time the fraud was discovered it was too late. LPAs, on the other hand, are subject to scrutiny requiring the person making the LPA to be certified as having the mental capacity to do so and to have made their decision without being subject to undue pressure or fraud.
However, there are still thousands of EPAs currently in use, and the limited checks on them makes financial abuse easier to accomplish. If anyone currently has an EPA, they should consider updating it or getting a new LPA as soon as possible – either a property and financial affairs LPA or a health and welfare, LPA or both. In both cases, the LPAs cannot be used by the attorneys until they have been registered with the Office of the Public Guardian.
Who you give power of attorney to is one of the really big decisions in life so getting it right is very important. Accepting power of attorney is also a significant decision with the considerable responsibility that comes with it. For instance, there may come a time when a family member or close friend requires long term care and their attorney(s) may need advice on the best way to fund that care.
It is important to be assured that cases of misuse of powers of attorney are few and far between, but no less devastating when they do happen.
At PKF Francis Clark Financial Planning, we are in the business of protecting and enhancing our clients’ financial security so if we can be of help in taking care of your future, please contact us.