Attorneys beware! Rising concerns over misappropriated assets
The misappropriation of assets when someone is frail, elderly, vulnerable or just too trusting of people who have access to their accounts is a growing concern particularly with diseases like dementia on the rise.
In our last instalment, we considered the steps executors should take in the course of administering a deceased's estate if they suspect assets to have been misappropriated during a person's lifetime.
In this article, we examine what attorneys can do to protect themselves from accusations of abusing their position and avoid a challenge by disgruntled family members. We also consider what you should do if you have suspicions about the actions of an attorney.
What do we mean by misappropriated assets?
- Salaries or expenses being paid to people without authority to do so
- Large or unexplained cash withdrawals
- Suspiciously large gifts being paid to the attorney
- The proposed or actual transfer of properties to the attorney
The case of the elderly Aunt and her "well-meaning" nieces?
The case of Re GM, heard back in 2013 by the Court of Protection, concerned joint deputies (deputies are appointed by the court when a person no longer has capacity to appoint an attorney) and still provides useful guidance for both deputies and attorneys.
The deputies, in this case, applied for the retrospective approval of gifts they had made from their elderly great aunt - funds to themselves and their families - and for approval of their deputyship expenses.
The aunt was in her nineties and no longer had capacity. She lived in a care home. With her daughter having predeceased her, she had no close family. Her estate was worth approximately £500,000. The order appointing the deputies authorised the making of charitable gifts, and gifts to persons related to the aunt "on customary occasions ... provided that the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of her estate".
The Deputies had made gifts to charities of £57,000. They had also made gifts to themselves of £104,000, consisting largely of high-value watches and jewellery. They gifted £62,500 to their own close family and made smaller gifts of just over £7,000 to the same individuals. They moved the rest of their aunt's remaining assets into their own names. Finally, they spent over £46,000 on a car and a computer each, which they considered to be deputyship expenses, enabling their weekly visits to their aunt and online monitoring of her investments. They had not discussed any of the expenditure with her.
The deputies argued that the gifts were in accordance with their aunt's wishes, were reasonable in light of the value of the estate, and left her with approximately £200,000, which they considered would be enough to maintain her during her lifetime.
The Court's decision
The court ruled that over the three years in which they had acted as deputies, gifts made to themselves, and their immediate family were authorised in the sum of £13,500.
Perhaps unsurprisingly, the court decided the more extensive gifts contravened the deputies' authority because:
- They were completely out of character with gifts made by the aunt before becoming incapacitated
- There had been no attempt to encourage the aunt's participation in the decision-making process or to ascertain her wishes
- The deputies' ignorance regarding their role and responsibilities was no excuse
The court considered that the cars and computers were not 'expenses', but unauthorised gifts for which approval should not be given retrospectively.
The deputies were removed by the court and ordered to pay back almost £205,000.
The court, in reviewing whether gifts should be authorised, set out the following useful checklist:
- Does the person lacking capacity have a life expectancy of less than five years?
- Does their estate exceed the nil rate band for inheritance tax purposes, currently £325,000?
- Are the gifts affordable having regard to care costs, and will not adversely affect the quality of life of the incapacitated person?
- Is there any evidence that the incapacitated person would object to gifts of such magnitude?
- What attempts have been made to discuss the proposed gifts with the incapacitated person?
This case is helpful guidance for all attorneys or deputies to consider when making gifts. This includes those who may not have intended to deliberately deplete the person's funds but may not fully understand the strict rules and duties that attorneys and deputies must abide by.
What should an attorney do to protect gift making?
Common errors amongst well-meaning attorneys are failing to keep receipts or proper accounts of transactions; mixing personal funds with those of the incapacitated person; exceeding the permitted sum of gifts; failing to consult with the vulnerable person (even if the person has lost capacity).
If you are thinking of appointing an attorney, appointing a professional to act alongside a family member can be a valuable protective measure.
If you are acting as an attorney, it is important to obtain clear advice at the outset and make sure you have read and understood the Mental Capacity Act 2005 Code of Practice which provides relevant guidance as to an attorney's conduct.
If you suspect an attorney is acting inappropriately, act immediately, and contact the Office of the Public Guardian (OPG) for guidance and advice. If the OPG considers there are grounds to do so, it will conduct a confidential investigation into the attorney's conduct. If there is clear evidence of wrongdoing it will be possible to bring court proceedings to remove the attorney.