Executors beware! Rising concerns over misappropriated assets

In the first of two articles on this topic, we examine what can be done to unravel the issues when a deceased friend or relative may have fallen prey.

The duty of personal representatives to investigate

Executors named in a Will or administrators, in the absence of a valid Will, serve as the personal representatives (PRs) responsible for managing the deceased person’s estate. They must provide a comprehensive account of all the assets held by the deceased at the time of their death to the beneficiaries. In instances where there are questionable transactions during the deceased’s lifetime - such as discrepancies in bank account balances or the transfer of property to third parties - the PRs must diligently investigate these transactions to ensure their legitimacy.

It is common for an attorney to have been appointed, under either a Lasting or Enduring Power of Attorney (LPA/EPA), by the deceased whilst they were alive. First, the PRs should call for the LAP/EPA and check if the document imposed any restrictions that limited the attorney’s powers, for example, a bar on the sale of property. Investigating will then typically start with a review of the deceased’s bank accounts to identify the total number and sums of any suspicious transactions made. PRs should ask the attorney to provide an explanation if anything looks unusual.

Identifying gifts and their purpose

Next, PRs should request and review receipts and accounts for any transactions that call for further questioning. It is a common misconception amongst attorneys (including those who may not intend to misappropriate) that large gifts are permitted. For example, paying family members large sums to reduce inheritance tax. The attorney incorrectly assumes that such gifts are legally permissible, under the belief that making them is considered to be in the person’s best interests. However, if those gifts are out of step with the deceased’s typical gifting pattern, such gifts should usually have been authorised first, through the Court of Protection, to safeguard the person’s interests.

Who authorised the gifts or transactions?

An equally important consideration is whether the susceptible person had the mental capacity to authorise any extraordinary transactions made during their lifetime and whether they did so. Finance & Property LPAs can be used before a person has lost capacity as long as they are registered, but capacity is rarely a cut-and-dried case. The Mental Capacity Act 2005 imposes duties on attorneys to assist the susceptible person in making as many decisions for themselves as possible. Where the position is unclear to a PR, they are entitled to obtain medical records and a report from the person’s GP or treating clinicians to investigate.

What can be done to recover the assets?

If misappropriation is found to have taken place by a Court, and the person in question is a beneficiary of the estate, the financial remedy will often be to deduct the sums misappropriated from their share of the estate.
It can be more difficult and costly to recover assets where the recipient is not a beneficiary, when it may be necessary to claim the monies from them personally. PRs should weigh up the cost/benefits of doing so carefully, always keeping in mind what is in the best interests of all the beneficiaries.

How to avoid criticism or a claim

Sadly, we have seen cases of financial abuse of vulnerable people rise sharply over the years. If PRs are concerned about lifetime transactions, they should not hesitate to seek specialist advice without delay. This will ensure that the PRs are seen to be properly discharging the duties they owe to the beneficiaries of the estate. And importantly, will protect them from a potential legal challenge for not taking appropriate action if financial abuse has been at play.

For further information about Executorships, please contact Fiona Lawrence in our Private Client team on 07909 901 370 , or complete the form below.