A Potential Pitfall for Attorneys
6 March 2014 by Diane Rudd
Many people appoint family members or friends to be their attorney’s so that their affairs (either financial or medical) can be dealt with if they do not wish to do this themselves or if perhaps their mental faculties deteriorate. It is often thought that a financial power of attorney effectively means that an attorney can deal with a persons assets as if he or she was the person himself/herself. Although there are circumstances when this is true it is not always the case; for example, an attorney has restrictions relating to gifts.
An Attorney is an individual or individuals appointed by a legal document by a person who grants authority on such an individual or individuals to act on his or her behalf. The attorney may start acting immediately or there may be an agreement that although the Attorney has been appointed, no action should be taken until the person authorises it. The attorney has to be over the age of eighteen and should know the person well enough to make decisions that are in the persons best interests. The person should trust the attorney as there is the possibility that the attorney could abuse their position or there could be a conflict of interest between what is best for the attorney and what is best for the person.
Attorney’s are often aware that a person can make lifetime gifts and such gifts are (depending on the amounts given and the length of time between the gift and the individuals death) often tax free. They often think “if a person can make such gifts and I am representing the person then I can make them for him/her”. This is not the case and very broadly an attorney can only make gifts where:
(a) The recipient is either an individual who is related to or connected with the person, or
(b) A charity to which the person previously made gifts. The gift to a charity can be made at any time of the year but a gift to an individual must be of a seasonal nature for example birthdays, Christmas or perhaps a birth, marriage, civil partnership or on the anniversary of such a date
(c) The value of the gift is not unreasonable bearing in mind the size of the assets and gifts previously made
In practice anything over and above what the person had given when dealing with their own finances is questionable. An attorney has duties to the person and large gifts can often only be made with the consent of the High Court. In some circumstances the official solicitor has to be involved.
There have been instances of attorney’s repaying their personal mortgages, buying cars for themselves and paying their credit card bills from funds that they should have been using for a person. A recent case involved an attorney who had used £95,000 of her father’s assets for her own benefit! She was convicted in a criminal court and returns to court in May 2014 when she faces being stripped of her assets to repay the money.