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Abuse of power of attorney? How is son caught?

Hard Up Britain! 71 year old pensioner (POA) wants to raid 94 year old senile mother's cash pot!!!

Client's husband rang me about a 71 year old male friend of his. Friend is a (poor) former bankrupt architect and has power of attorney over 94 year old senile mother. Mother's estate less than £325,000 (Nil rate IHT band).

Friend's house about to be repossesed unless he can remortgage or find other funds. Friend thinking of "raiding" senile mother's savings (£120k) because he has power of attorney over her financial affairs.

Advised client's husband I would not give advice and neither should he to friend. But this started me thinking. There will never be any IHT to pay so HMRC have no interest in this case. I mentioned that legally the friend should not be making such a large gift to himself (can someone confirm this - I seem to recollect a case where someone with power of attorney accelerated the rate of gifts and had some type of sanction against him but I cannot remember if it was a tax case or a legal aspect). His justification is that he is merely advancing his inheritance.

If the friend goes ahead and grabs the cash, who is it that takes action against him, in what form and what are the sanctions against the friend for so doing.

Any other helpful comments would be appreciated.

 

 

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19th Oct 2017 06:10

He would be breaking the law if he did so (Mental Capacity Act 2005) unless they get court clearance. https://www.blakemorgan.co.uk/news-events/blog/making-gifts-under-power-...

Might be easier if presented as a documented loan? Then if your client dies first (anything can happen), the mother's estate is intact...

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to WhichTyler
19th Oct 2017 08:37

PS Deputies (who are appointed by a court when the person does not have capacity to appoint an attorney) have to make an annual report on their decisions. so he could be caught by that process

Otherwise the Office of the Public Guardian is the regulator see (https://www.gov.uk/government/publications/giving-gifts-a-guide-for-depu...). I don't know how actively they police things but I expect they respond to tip offs if friends or other carers think there has been dirty work.

the tests are clear and reasonable so this guy should not be afraid of going to court for permission if he is acting reasonably. If however, £120k is every penny she has left and there's nothing left for her needs, he'll need to think again...

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to WhichTyler
19th Oct 2017 09:40

OP and WhichTyler, there's a potential complication in that an "older" type Power of Attorney (called an Enduring Power of Attorney) created prior to October 2007 would allow greater leeway for the son to manage his mother's affairs unhindered; the "newer" type Power of Attorney (created post-Oct 2007, and called a Lasting Power of Attorney) gives social services great power to challenge transactions if they deem them not to be in the best interest of the mother (along the lines that you have mentioned WhichTyler).

So is this an Enduring or a Lasting Power of Attorney?

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to WhichTyler
19th Oct 2017 09:42

WhichTyler wrote:

PS Deputies (who are appointed by a court when the person does not have capacity to appoint an attorney) have to make an annual report on their decisions. so he could be caught by that process

Otherwise the Office of the Public Guardian is the regulator see (https://www.gov.uk/government/publications/giving-gifts-a-guide-for-depu...). I don't know how actively they police things but I expect they respond to tip offs if friends or other carers think there has been dirty work.

the tests are clear and reasonable so this guy should not be afraid of going to court for permission if he is acting reasonably. If however, £120k is every penny she has left and there's nothing left for her needs, he'll need to think again...

This.

The problem comes when the mother's care needs upgrading and the son has spent all the funds. I would not recommend that he simply writes a cheque out to himself.

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to lionofludesch
19th Oct 2017 10:14

If she has £120k at least in ready cash, then she is probably paying for her own care, rather than relying on local authority. These costs will diminish her estate until it reaches c£23k iirc; when LA step in. If she passes a chunk to her son and it brings her below £23k sooner than otherwise would have happened, the LA may (and should in my opinion) ask questions...

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to WhichTyler
19th Oct 2017 10:27

It depends. My 91 year old aunt got 100% of her care costs paid as she was deemed to be in a sufficiently bad way. It was a bit of a surprise to my brother and me at the time but, as she died a month later, it seems to have been borne out by the facts.

I'm making no assumptions either way yet acknowledging all possibilities.

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By NDH
to lionofludesch
19th Oct 2017 11:11

When someone is deemed to have health needs (rather than care needs) then it's funded by the CCG rather than the local council (which does have the £23k savings limit).

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By 64463Sa
19th Oct 2017 09:21

Does this not rather presuppose that he is due to inherit some or all of the estate?

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to 64463Sa
19th Oct 2017 09:42

She's probably lost the ability to change the will so it'll be whatever the will says. On the other hand, she might need to reduce her estate to pay for her care.

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By NDH
19th Oct 2017 11:24

I think what he want's to do could easily be described as theft. It's not his money so he has no right to it and taking it is not in the best interest of his mother.

Assuming senile means that she has some form of care needs then with that level of savings she would be a self funder and as such would be able to get much better care than that would be funded by the local authority.

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19th Oct 2017 11:29

I think that it is a legal question rather than accounting. I have a deputyship for my mum and was appointed through the Court of Protection. Mum had no capacity to do a power of attorney. The deputy has to make a lengthy financial report annually and has regular visits from someone appointed by the COP to check all the paperwork. A power of attorney isn't regulated in the same way. I would guess if the money is taken by the son and her funds run out social services who will pick up the bill for care would involve the police.

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19th Oct 2017 13:15

The issue is whether it is "dishonest" in the criminal law sense of that word. If it is then it could be 'fraud by abuse of position' contrary to s4 Fraud Act 2006. That could be a police matter.
If nobody loses out - for example if he is the sole beneficiary of the estate and there is no call on the local authority for care costs etc - then probably no complaint will be made, no investigation will be made & no action will be taken.
However all it takes is, say, a disgruntled spouse with an axe to grind to make a report to the police & all hell could break loose!
One option would be for him to obtain independent (written) legal advice that it would be OK to do this. Then if anyone complains he can say he was acting honestly & in accordance with legal advice.
David

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