Interactive Investor

Financial abuse on the rise as power of attorney legal actions reach record high

Making improper gifts and not acting in the vulnerable person’s best interests are behind the rise in …

9th October 2019 10:14

Kyle Caldwell from interactive investor

Making improper gifts and not acting in the vulnerable person’s best interests are behind the rise in financial abuse.

Court action against people acting with power of attorney on behalf of vulnerable people jumped by 55% in the last year, to a record high.

Data obtained by Nockolds, a law firm, shows the Office of the Public Guardian (OPG) made 721 applications to the Court of Protection to censure or remove attorneys in 2018/19, up from 465 the previous year.

The number of legal actions taken against people with power of attorney has more than doubled over the past two years. Making improper gifts and not acting in the vulnerable person’s best interests were two key reasons behind the rise in financial abuse.

In addition to these actions, the OPG launched 2,883 safeguarding investigations in 2018/19. That represents an increase of 54% from the previous year’s 1,871.

Peter King, partner at Nockolds, points out the sharp rise in legal actions against attorneys is in percentage terms vastly greater than the increase in the number of attorneys on the register. The figures for the total power of attorney applications received by the OPG in 2017 stood at 765,354, rising to 810,275 in 2018 – an increase of 6%.

But power of attorney applications have increased by more than 50% over the past five years, with 525,915 applications made in 2015. One of the drivers has been the growing number of people being affected by a serious health issue such as dementia

According to King, the spike in the number of legal actions over the past year raises fundamental questions about how the current system operates and whether there are sufficient safeguards at the point at which people register.

“Misconduct among attorneys is very difficult to detect, so these numbers are likely just the tip of the iceberg,” he says, adding that many LPAs are now created without any professional advice following “watered down” safeguards ushered in over a decade ago.

He adds: “The safeguards introduced in 2007 were watered down from the start, meaning that a lasting power of attorney (LPA) can be registered after someone known to the donor, but without any relevant professional skills, certifies that the donor understands the purpose of the LPA and the scope of the authority they are giving, as well as being sure that no one has unduly  pressured the donor to sign it.”

Under LPA agreements, attorneys are given the responsibility to manage a named individual’s personal and financial affairs should they lose the mental capacity to do it themselves. Deputies are appointed by the Court of Protection if an individual loses mental capacity without an LPA being agreed. A deputy takes decisions in much the same way as an attorney would, but is more closely scrutinised by the authorities and won’t necessarily be the person the individual would have wanted to be making those choices.

There are two types of LPA – one covering property and financial affairs, and the second covering decisions around health and welfare.

The rise in court actions against people acting with power of attorney is the latest example of financial abuse gaining more prominence. In June, we reported that leading barrister Ruth Hughes, a specialist in wills, estates and family provision, cautioned that financial abuse is becoming a more “prevalent problem”.

Tennis star Serena Williams has also been shining the spotlight on financial abuse to raise awareness. Williams recently told Woman’s Day: “Not being able to use your credit cards, having to show receipts for every little dime that you spend, having freedom of choice taken away from you. Those are all signs.”  

Financial abuse is defined as the illegal or unauthorised use of a person’s property, money, pension book or other valuables (including changing the person's will to name the abuser as heir). Overall, around 130,000 people in the UK over the age of 65 have reported financial abuse over the past 12 months.

Economic abuse, on the other hand, is a form of coercive control and is a common tactic used by abusers to gain power in a relationship. Abusers use a range of methods, including controlling their victim’s money or running up debts in their name.

According to Hughes, family members or ‘friends’ who have been given power over property and finances may abuse the trust placed in them. This trust could be abused by managing their finances or property incompetently; or by neglecting to act at all. “Such action can mean that vulnerable people are left without the resources they need, and their quality of life is significantly reduced,” says Hughes.

King agrees, pointing out: “One of the most common mistakes attorneys make is assuming they can make decisions on behalf of a relative without the relative’s approval, rather than helping the relative to make their own decisions.” He adds: “Attorneys often fail to understand that they have to act in the interests of the vulnerable person and cannot simply second-guess their wishes and, for example, claim that paying university fees for the attorney’s children is ‘what they would have wanted’”.

Under a new UK bill currently making its way through Parliament, the impact of financial abuse will be legally recognised as domestic abuse and can be reported as a crime. Legal guidance for prosecutors will be changed to ensure cases of financial abuse can be successfully prosecuted where appropriate.

If you are the victim of financial or domestic abuse, you can call the 24-hour National Domestic Violence Helpline (run by Women’s Aid and Refuge) on 0808 2000 247. 

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

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