The pandemic is profoundly impacting us all, but no-one more so than the elderly and the vulnerable. Not only are they at increased risk of complications from COVID-19, they’ve also become increasingly isolated and dependant on others to bring their daily provisions, as they follow advice not to leave their homes.
Equity Release Council – removal of face-to-face meetings
At the same time, in response to the new challenges caused by shielding and social distancing, the market is relaxing standard safeguarding procedures. For example, the Equity Release Council has temporarily relaxed its Rule 8 enabling solicitors to now complete an equity release without seeing their client at a physical face-to-face meeting, a rule which has been mandatory for the last six years. And for good reason: so solicitors can ensure their clients have the mental capacity to enter into the equity release contract and aren't under duress or coercion to enter into it. It’s now also not necessary for a solicitor to physically witness the mortgage deed, which can now be carried out by a witness of the client's choosing.
This is a significant relaxation of what the Council describes as its usual “gold standard” of a 1:1 meeting, designed to protect the wealthy vulnerable, thereby increasing the opportunities for third parties to coerce a relative or friend to release equity in their home for the third party’s benefit or to take advantage of those who are either losing capacity or have become incapacitous. While I acknowledge the Council claims to have put in place a multi-layered alternative, I don’t accept this offers the same level of protection, not least because it relies on remote assessments, which can be tampered with easily by a third party.
New challenges
Accordingly, there appears to be a potent set of circumstances at play - amongst the elderly and vulnerable, an increase in fear, mental distress, social isolation and increasing dependency on third parties. Amongst the working-age group, there's an increase in financial hardship, uncertainty and unemployment. At market level, there's a significant relaxation to standard safeguarding procedures. In my view, this sets the stage for a spike in vulnerable people becoming the subject of financial abuse, compounding what's already a very significant problem. Even before COVID-19 came into existence, between 2017 and 2019 the number of Office of the Public Guardian (OPG) investigations into financial abuse more than doubled.
Notwithstanding the very recent rolling back of some lockdown measures, while social distancing endures and the health risks to the elderly and other vulnerable groups is still high, I don't see this situation changing soon. Indeed, the elderly are still being strongly advised to stay at home. I suspect that the new alert system shall be used as a way of pulsing social distancing and the requirement to stay at home, and the relaxation to safeguarding procedures will stay with us for some time.
OPG Guidance – 17 April 2020
Last month, in response to the COVID-19 situation, the OPG published Guidance - "Short-term options for health, welfare and financial decisions." It recommends, if you are shielding or self-isolating, that you can execute either: (i) a third party mandate which allows a third party to deal with your bank account for you, or (ii) a general power of attorney conferring power on an attorney to deal with your financial affairs on your behalf. Both of these arrangements are predicated on trust. While this advice might make sense practically, these arrangements are potentially very dangerous because they can be exploited easily by the donee (the third party acting on your behalf).
This appears to be another example of arguably questionable advice from the OPG on how people should protect their money. For example, in March 2019 the OPG launched a campaign advising people to execute both types of Lasting Power of Attorney – health and welfare and property and finances. In the event you lose capacity in these domains, you have someone you trust ready to make the relevant decision for you. The OPG advised that you can complete the relevant applications online, or they can send you hard copy documents and, very worryingly, if things seem straightforward, that there's no need to take legal advice.
Law Society’s Practice Note
The OPG’s advice is at odds with the Law Society Practice Note on financial abuse, which emphasises the importance of clients understanding the risks, as well as the benefits, of granting these powers, the potential for these arrangements to be abused and the value of building in appropriate safeguards. It's equally important for the donee to understand their responsibilities and the limitations on their powers, especially as regards gifting, where there still seems to be abundant confusion. Ultimately, making an LPA is a serious step, which should be done with the benefit of legal advice in almost all cases.
Deputyships
Furthermore, the OPG makes no mention of the Court of Protection deputyship arrangement. This is the alternative should someone lose capacity to manage their property and affairs, if they've not made an LPA. The benefit of a deputyship is that the deputy (the person appointed to manage the affairs of the incapacitated person) is required to complete an inventory of the incapacitated person’s assets and liabilities at the outset and they're required to file an annual report by way of account to the OPG. Also, a deputy is required to take out a security bond, a type of insurance, which provides for a source of funds which, should there be any abuse or misappropriation of assets, can be called in to make the incapacitated person’s estate whole again (See Re GM [2013] COPLR 290).
While it's admirable for the OPG to try to get people thinking about planning for their later life, it seems to me to be unsafe to promote people taking these steps without getting legal advice. An LPA is an arrangement based on trust with very little oversight. They can be easily exploited and are, regularly. Anyone considering an LPA must understand these risks. The same applies to their current COVID recommendations, which, given the potency of the circumstances, I think border on irresponsible.
Advice and next steps
My overarching advice to anyone considering appointing a third party to manage their finances for them, whether they're shielding at home or otherwise, is to seek legal advice on their options. Appointing someone your attorney, whether under a general power of attorney or LPA is a serious step and not one you should take lightly or where you should engage in DIY. A solicitor can advise you on the risks, building in safeguards and what the alternatives are if you decide not to execute one.
If you're concerned about someone’s capacity to manage their finances or enter into a particular transaction, seek legal advice about making a Court of Protection application and, if necessary, organising for a doctor to assess capacity in these domains. If you have concerns about an incumbent deputy or attorney, an application can also be made to the Court of Protection for an order relating to the production of accounts and records, their removal from office or for a variation of their powers. The relevant test is one of the incapacitated person’s best interests.
Finally, my advice would be to consider appointing a professional attorney, trustee, or deputy instead of a family member, neighbour, friend, or recently befriended stranger. While a professional shall charge you for their time, they will be experienced in administering money and the arrangement will safeguard your estate from potential abuse. This is particularly important if your wealth is significant or you have a complicated portfolio of assets. It isn't out of bias that I suggest this. I've seen the difficulties that mingling money and family brings. It can often crystallise in bad feelings in families and even full blown disputes, which can be avoided by using professionals instead, allowing families to focus on love and affection.
Further practical advice for practitioners can be found here or watch our recently recorded webinar on financial abuse here
Published: May 2020
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May 2020
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