Money management Money management and mental impairmentand mental impairment

Belinda SchwehrBelinda Schwehrbelinda@careandhealthlaw.combelinda@careandhealthlaw.com

Legal and Training ConsultantLegal and Training Consultantwww.careandhealthlaw.com

Tel: 01252 725890Tel: 01252 725890

Today’s topics

The ‘different hats’ or status problem, in relation to people acting ‘for’ other people

Guidance about actually checking the status of such people

Land Charges and joint ownership Deferred payments etc Continuing Health Care Miscellaneous principles and

materials

Capacitated vs incapacitated people – why it matters

Whatever we end up calling it, a ‘helping’ person who is chosen or accepted by the client, with mental capacity, in the context of helping them with their money, is an agent, a manager, a ‘proper’ representative, acting for that person as his or her agent.

That means that the services that are then bought are bought BY THE client service user as the principal, albeit with help.

The rules of agency apply, and that means that any deal made with the agent is a deal made with the principal, who can sue on it and be sued on it.

The agent / attorney can’t be sued on it, because he is not suggesting he’s contracting for himself.

The only exception is if the agent holds himself out as authorised to do something, isn’t authorised, and you don’t know that.

The trouble with your group’s questions is that they are all about scenarios where you DO know the person is not authorised, properly...but want to deal with them, for convenience, in relation to statutory tasks related specifically to the service USER.

Capacitated vs incapacitated people – why it matters

An incapacitated person cannot appoint or choose an agent; he can only have a statutory agent, appointed by the Court of Protection.

Deputies and agents do legally stand in the shoes of the client, and count as if they were one and the same as them, so that they are acting as agent.

Anyone else – apart from a deputy or attorney – (ie a carer, relative, spouse or agency, or trustees, who looks like they’re contracting ‘for’ that person), does so, in law, as either someone else’s agent (ie the LA’s) or in their own name eg a Suitable Person under the new DP rules, for instance.

The test of incapacity in relation to money Can the person absorb basic information about the pros

and cons of an issue? Simply communicated, of course.– This means what has to be done to cope with money

and debts, and what will happen if it isn’t done. Can the person retain the information for long enough to

process it?– Substance abuse, dementia, LDs, chronic degenerative

conditions could all make this bit hard to pass… Can the person be said (objectively) to be weighing up the

pros and cons against their own (subjective) value system, and arriving at a decision?– What is the evidence of any kind of weighing up?

Disinhibition in the face of temptation to buy particular things, could negate this stage of the test.

Can they communicate it somehow?– This means simply, but it has to be more than

acquiescence, from someone who is able to make positive dissent, clear.

At what stages doesAt what stages doesthe issue arise?the issue arise?

People apparently preferring to cope without People apparently preferring to cope without social servicessocial services

Granting a power of attorneyGranting a power of attorney Making decisions about pensions, retirement, Making decisions about pensions, retirement,

equity release etcequity release etc Claiming benefitsClaiming benefits Being financially assessed and paying chargesBeing financially assessed and paying charges Buying services, property, etcBuying services, property, etc Signing and surrendering tenanciesSigning and surrendering tenancies Making giftsMaking gifts Making willsMaking wills

Your questionsYour questions Recovering funds for people from dodgy Recovering funds for people from dodgy

others – as deputy, maybe or via others – as deputy, maybe or via safeguardingsafeguarding

Recovering funds for the council – ie Recovering funds for the council – ie debts for social care chargesdebts for social care charges

Recovering contributions when the Recovering contributions when the ‘agent’ has misled you about his authority‘agent’ has misled you about his authority

Recovering contributions when the Recovering contributions when the ‘agent’ has misled you about the ‘agent’ has misled you about the principal’s assets... principal’s assets...

Where the third party was claiming to Where the third party was claiming to act as agent, has no authority to act...act as agent, has no authority to act...

You can sue the third party for breach You can sue the third party for breach of warranty of authority if you did not of warranty of authority if you did not know he had no authority to do the know he had no authority to do the thing in question. thing in question.

The trouble is, you The trouble is, you shouldshould have known. have known. – Sight of any EPA should have been asked Sight of any EPA should have been asked

forfor– An LPA is not valid unless perforated upon An LPA is not valid unless perforated upon

registration by the OPG.registration by the OPG.

New stuff from CRAG – which fixes New stuff from CRAG – which fixes you with the duty to askyou with the duty to ask

Residents and Enduring Power of Attorney, Lasting Residents and Enduring Power of Attorney, Lasting Power of Attorney or Property and Affairs Power of Attorney or Property and Affairs Deputyship etc Deputyship etc

1.020 In all cases, the LA should find out if a resident has 1.020 In all cases, the LA should find out if a resident has any of the following: any of the following:

• • Enduring Power of Attorney (EPA); Enduring Power of Attorney (EPA); • • Lasting Power of Attorney (LPA) for Property and Affairs; Lasting Power of Attorney (LPA) for Property and Affairs; • • Property and Affairs Deputyship under the Court of Property and Affairs Deputyship under the Court of

Protection; or Protection; or • • any other dealings with the resident’s affairs (e.g. any other dealings with the resident’s affairs (e.g.

someone who has been given appointee-ship by the someone who has been given appointee-ship by the Department for Work and Pensions (DWP) for the purpose Department for Work and Pensions (DWP) for the purpose of Benefit payments). of Benefit payments).

New guidanceNew guidance 1.021 Social work staff should establish at the time of 1.021 Social work staff should establish at the time of

the assessment of care needs whether a resident has the assessment of care needs whether a resident has the capacity to consent to the care plan and any the capacity to consent to the care plan and any following financial assessment. If a resident appears following financial assessment. If a resident appears to lack the capacity to consent to their financial to lack the capacity to consent to their financial information being given to the LA, while all information being given to the LA, while all practicable steps have been taken to help the practicable steps have been taken to help the resident, the LA should make enquiries as to whether resident, the LA should make enquiries as to whether there is a registered EPA, or registered LPA for there is a registered EPA, or registered LPA for Property and Affairs, or a Property and Affairs Deputy Property and Affairs, or a Property and Affairs Deputy to manage the person’s financial affairs, or an to manage the person’s financial affairs, or an Appointee by the Secretary of State for Work and Appointee by the Secretary of State for Work and Pensions to manage the person’s benefits. Pensions to manage the person’s benefits.

New guidanceNew guidance

• • An EPA can be used without being registered An EPA can be used without being registered whilst the resident has capacity, provided the whilst the resident has capacity, provided the resident consents. If the resident loses capacity an resident consents. If the resident loses capacity an EPA cannot be used without being registered, EPA cannot be used without being registered, though it can still be used for essentials whilst in though it can still be used for essentials whilst in the process of being registered (e.g. it can be used the process of being registered (e.g. it can be used for the payment of regular bills, but not major for the payment of regular bills, but not major matters, such as selling a house). An attorney can matters, such as selling a house). An attorney can only apply to register an EPA when they believe the only apply to register an EPA when they believe the resident is loosing capacity. LPA replaced EPA on 1 resident is loosing capacity. LPA replaced EPA on 1 October 2007. A person given power under an EPA October 2007. A person given power under an EPA before 1 October 2007 can still use it and apply to before 1 October 2007 can still use it and apply to have it registered. have it registered.

New guidanceNew guidance • • A Property and Affairs LPA can only be used when A Property and Affairs LPA can only be used when

it has been registered. However, a LPA can be it has been registered. However, a LPA can be registered whilst the person has capacity. registered whilst the person has capacity.

• • With regard to a person Appointed by the With regard to a person Appointed by the Secretary of State for Work and Pensions to Secretary of State for Work and Pensions to manage the person’s benefits, unless such a manage the person’s benefits, unless such a person falls within one of the other categories (e.g. person falls within one of the other categories (e.g. EPA or LPA) the appointee has no power to make EPA or LPA) the appointee has no power to make decisions on behalf of someone who lacks capacity decisions on behalf of someone who lacks capacity except in relation to benefits as provided under except in relation to benefits as provided under DWP regulations. DWP regulations.

While residents have capacity, they may wish to While residents have capacity, they may wish to choose whether to give the information themselves choose whether to give the information themselves or to pass this their Attorney. or to pass this their Attorney.

What if there’s no-one?What if there’s no-one? 1.022 If there is no one acting in this capacity, and if, following 1.022 If there is no one acting in this capacity, and if, following

an assessment of capacity to make financial decisions, it is an assessment of capacity to make financial decisions, it is considered that the person does not have the capacity to considered that the person does not have the capacity to manage some or all of their finances, manage some or all of their finances, the LA should satisfy the LA should satisfy itself under its duty of care that there are arrangements itself under its duty of care that there are arrangements put in place which meet the requirements of the Mental put in place which meet the requirements of the Mental Capacity Act 2005.Capacity Act 2005. (Belinda: short of a person having access (Belinda: short of a person having access to hard cash of the service user, so that they can use pledging of to hard cash of the service user, so that they can use pledging of credit provisions, or short of the third party paying for the credit provisions, or short of the third party paying for the service him or herself and waiting for reimbursement, this service him or herself and waiting for reimbursement, this means that you have no choice but to place because of your means that you have no choice but to place because of your functions, duty, and best interests.)functions, duty, and best interests.) Provision of services should Provision of services should not be delayed whilst applications are made to register an EPA/ not be delayed whilst applications are made to register an EPA/ Property and Affairs LPA or to appoint a Property and Affairs Property and Affairs LPA or to appoint a Property and Affairs Deputy or an Appointee. Deputy or an Appointee.

When the third party When the third party hadhad authority but authority but misled you about the principal’s assetsmisled you about the principal’s assets

The mistakes of the agent are the mistakes The mistakes of the agent are the mistakes of the donor, so your rights against the of the donor, so your rights against the donor are intact, albeit unattractive to donor are intact, albeit unattractive to pursue - the charging framework allows pursue - the charging framework allows for recovery of non-disclosed assetsfor recovery of non-disclosed assets

You cannot sue the agent in his own right You cannot sue the agent in his own right for the debt, as he is acting for the for the debt, as he is acting for the principal, albeit poorly.principal, albeit poorly.

Remedies are either via CoP or the client Remedies are either via CoP or the client being assisted via a Litigation Friend.being assisted via a Litigation Friend.

When the third party has acted When the third party has acted fraudulently etc for his own benefitfraudulently etc for his own benefit

The only way the vulnerable adult can be The only way the vulnerable adult can be assisted is via the Official Solicitor to bring assisted is via the Official Solicitor to bring legal proceedings for breach of fiduciary legal proceedings for breach of fiduciary duty against the agent, or through some duty against the agent, or through some other litigation friend or through the CoP other litigation friend or through the CoP cancelling the power, if it is a formal EPA cancelling the power, if it is a formal EPA or LPA.or LPA.

The authority might take on this role if it The authority might take on this role if it would enable the authority to reclaim fees would enable the authority to reclaim fees due from the VA.due from the VA.

Third party top upsThird party top ups In my view, the authority places the client in a more In my view, the authority places the client in a more

expensive than adequate care home in consideration of expensive than adequate care home in consideration of the relative agreeing to pay the difference between the the relative agreeing to pay the difference between the authority’s usual rate and the contractual rate of the authority’s usual rate and the contractual rate of the home. The agreement is made with the relative and can home. The agreement is made with the relative and can be enforced in the usual way. be enforced in the usual way.

Another route to recovery is to treat the top up as the Another route to recovery is to treat the top up as the income of the client, and thus discloseable and hence income of the client, and thus discloseable and hence chargeable for, and recoverable as a debt, under the chargeable for, and recoverable as a debt, under the charging framework. I am not so comfortable about that charging framework. I am not so comfortable about that because as soon as the third party ceases to pay, you because as soon as the third party ceases to pay, you should be re-assessing the client, who won’t HAVE the should be re-assessing the client, who won’t HAVE the income, just because the third party promised to pay it to income, just because the third party promised to pay it to YOU.YOU.

Debts on joint propertyDebts on joint property Where a charge has been put on a property by a creditor, Where a charge has been put on a property by a creditor,

and it is jointly owned, the non-owing service user must and it is jointly owned, the non-owing service user must have consented to the charge or been involved in the debt, have consented to the charge or been involved in the debt, otherwise the charge would not have been able to be put otherwise the charge would not have been able to be put on the house. on the house.

Assuming the debt is therefore jointly owed, the service Assuming the debt is therefore jointly owed, the service user’s share of the house – should it ever become user’s share of the house – should it ever become assessable (ie when partner dies and service user is left assessable (ie when partner dies and service user is left alone) is reduced by the value of the charge. It may be that alone) is reduced by the value of the charge. It may be that the share becomes the whole house, but if the couple were the share becomes the whole house, but if the couple were tenants in common the deceased one may have left his or tenants in common the deceased one may have left his or her share to someone else. A part share in a house is hard her share to someone else. A part share in a house is hard to value, if the other owner is not a willing seller.to value, if the other owner is not a willing seller.

Charges on joint properties Charges on joint properties under HASSASSAunder HASSASSA

I seem to recall that they can’t be done?I seem to recall that they can’t be done? Only a notice can be placed under the Only a notice can be placed under the

charging provisions under HASSASSAcharging provisions under HASSASSA A charge to secure a judgment debt is A charge to secure a judgment debt is

different, I think, but LAs rarely get that different, I think, but LAs rarely get that far.far.

Can be done with the consent of the other Can be done with the consent of the other owner if one is entering into a deferred owner if one is entering into a deferred payment scheme, I think.payment scheme, I think.

Deferred payment scheme Deferred payment scheme debtsdebts

Clients have 56 days after the death of the client or the Clients have 56 days after the death of the client or the termination of the placement to pay the deferred payment. termination of the placement to pay the deferred payment. That is an interest free loan.That is an interest free loan.

The implication after that is that the debt crystallises and if The implication after that is that the debt crystallises and if you then sue for it the debt will carry interest from the end you then sue for it the debt will carry interest from the end of the 56 days to the date of judgment and then beyond.of the 56 days to the date of judgment and then beyond.

If you do not issue legal proceedings you can still claim If you do not issue legal proceedings you can still claim what you would otherwise get, for the purposes of what you would otherwise get, for the purposes of settlement.settlement.

That is not adding interest under the Late Payment rules; That is not adding interest under the Late Payment rules; it’s simply the law of debt and the rights associated with it’s simply the law of debt and the rights associated with being a creditor. being a creditor.

CHCCHC

What if the placement terminates on account of What if the placement terminates on account of CHC entitlement. CHC entitlement.

The National Assistance Act placement for which The National Assistance Act placement for which the deferred payment agreement is the security the deferred payment agreement is the security WILL end because even if the person stays there, WILL end because even if the person stays there, the NHS must contract under NHS functions, not the NHS must contract under NHS functions, not social services.social services.

Exactly the same rules apply as under the Exactly the same rules apply as under the previous slide.previous slide.

The trouble is that the person is quite likely to The trouble is that the person is quite likely to lose CHC when next reviewed, and come back lose CHC when next reviewed, and come back within the responsibility of the LA. within the responsibility of the LA.

Access to a person’s assets – from the Code

6.64 Anyone wanting access to money in a person’s bank or building society will need formal legal authority. They will also need legal authority to sell a person’s property. Such authority could be given in a Lasting Power of Attorney (LPA) appointing an attorney to deal with property and affairs, or in an order of the Court of Protection.

6.65 Sometimes another person will already have legal control of the finances and property of a person who lacks capacity to manage their own affairs. This could be an attorney acting under a registered EPA or an appropriate LPA or a deputy appointed by the Court of Protection. Or it could be someone (usually a carer) that has the right to act as an ‘appointee’ (under Social Security Regulations) and claim benefits for a person who lacks capacity to make their own claim and use the money on the person’s behalf. But an appointee cannot deal with other assets or savings from sources other than benefits.

Liability for Necessaries

s7 Payment for necessary goods and services

(1) If necessary goods or services are supplied to a person who lacks capacity to contract for the supply, he must pay a reasonable price for them.

(2) “Necessary” means suitable to a person's condition in life and to his actual requirements at the time when the goods or services are supplied.

Control of the cheque book or PIN card

Giving someone a filled out cheque and asking them to sign it, is usually helping them continue to manage, even if they can’t work out quite what the money is for, or whether it is the right amount.

Using a person’s card, with knowledge of their PIN and their consent, works like this too. It’s informal agency.

It is a very dangerous practice, because at some point, capacity will deteriorate, and no-one will know, but the world would grind to a halt without it.

Having someone’s PIN card and knowing the number puts them in breach of the agreement with the bank or card company. It is widespread. It can invalidate the bank’s guarantees against loss in the case of fraud, identity theft etc.

Giving someone else your PIN number

IF you know of ways of doing it which are above board, ie with the knowledge and support of the financial institution, there’s nothing wrong with that.

You are then like a second signatory on the account, operating it with the consent of the account holder, and bound by the agreement between you two. You will be bound to give up the power when you know that the person has deteriorated beyond consenting to your help in this way.

There are some banks who will provide a person with two cards, one for him, or her, and one for the other signatory, so that records may be checked for who is removing the money each time.

I believe that this can only lawfully be done if the person owning the money has at least minimal capacity to make the person their helper in the first place.

Guardians and nearest relatives

Nearest Relatives have no special powers under the MCA in relation to money and property.

In England and Wales, Guardianship provides no legal means whatsoever to manage property or finances for the person protected.

In Scotland, these finance and property powers are part and parcel of guardianship.

Being a nominee account holder When a person acts as ‘a nominee’ for another, they do so

in the role of bare trustee for that person. Eg Parent for Child; capacitated person (such as deputy or appointed attorney) for a now incapacitated person who has never had a bank account before.

The nominee is the legal owner of the money, but not the beneficial owner.

Tax on the account counts as the beneficial owner’s tax, not the nominee’s tax.

The trusteeship binds the trustee nominee to act in a fiduciary best interests manner.

Wrongdoing is a breach of trust. In the past, care homes were expected to supply so called

‘nominees’ to operate accounts where the account holder did not have capacity, but where they had no legal authority, and were not administering a trust of anyone else’s money. This needs to be sorted out, because it puts them in an impossible situation of conflict re day to day spending.

It’s different to being a signatory, which means one is trusted to operate like an agent, by the account holder, as opposed to being a trustee.

Joint Bank Accounts Each person owns the full amount in legal

terms, regardless of who put the money in, so either person can empty the account

For charging purposes etc one half is owned by each, regardless of who put the money in

Additional signatory status is not the same thing; that’s simply giving a person the right to operate the account, and requires a mentally capacitated mandate to be given to the bank. It cannot continue past loss of capacity. Again, though, who would know?

Appointeeship Confers power on a person to manage

another’s benefits Not to manage their other money Not to manage their personal bank

accounts Not to sign contracts for them Corporate appointeeship means acting in a

private fiduciary relationship for each individual

Appointees are now expected to receive the money in a bank account in their legal name but as nominees for the actual beneficiaries. This means they DO manage a bank account – as trustee, effectively.

Deputyship Gives legal power to manage a person’s money or

welfare or both Power to act as a delegate of the Court of

Protection The order sets out what the Deputy can do, and

anything else has to be authorised by the Court The Deputy’s power, unlike those of the old form

of authority, receivership, is in exact correlation to the client’s incapacity, so the Deputy does not take over everything.

What became of Short Orders? The Public Guardian’s office says that they are known as Type III supervision, now, but they cost the same as Type I to apply for!

Deputyship – What’s Involved?

As a financial Deputy the kind of decisions that will be made re property and financial affairs will likely parallel the obligations of Receivership in the past.

A Deputy is treated as an agent of the individual in relation to anything done or decided by them, and can be paid their reasonable expenses in discharging his functions, out of the individual’s property - section 19(7)(a) MCA.

If the Court directs they can also receive remuneration from the individual’s property for discharging their functions – section 19(7)(b).

Who can be a deputy? Anyone over 18 – no specific restriction on bankrupts A holder for the time being of a specified office – ie the director of

social services, or the head of adult protection co-ordinator, maybe.

Joint or several deputies as the court thinks fit A deputy is treated as the agent of the person in relation to

anything done or decided by him or her. Deputies can be paid their reasonable expenses or remuneration

when this is directed by the court Deputies can be made to report to the Public Guardian whenever

told to do so. The deputy’s powers do not extend to any area where the deputy

reasonably believes that the person is still capacitated (this will mean that what deputies do for people on direct payments will still be able to be seen as assisting the person, not taking over, probably)

These powers may be exercised (apart from will-making) for anyone under 16 if he or she will still be likely to be incapacitated at the age of 18.

Schedule 2 supplements the rules in s18 about the powers of the court and deputies.

What deputies can not do – s20Deputies cannot: Prohibit contact with named persons Direct healthcare providers to allow another to

take over responsibility Settle property or execute wills Exercise any power of consent on behalf of the

person Override a decision within the scope of the

authority of a donee of an LPA Refuse consent to a life sustaining healthcare

intervention Restrain the person, unless 4 conditions are

satisfied – as with LPA holders, and additionally, that the act is within the scope of authority expressly conferred by the court

Trusteeship A trust is a mechanism whereby people decide what to do

with their money – either a benefactor, or someone who owns the money but wants to put distance between it and themselves – for tax or other legal reasons, like a PI damages trust, or a discretionary trust for their welfare.

They give the money to the chosen trustees to DECIDE what to do with it, and can only then benefit from its use, not get it back….

The trustees are obliged to act in the beneficiary’s best interests and can be sued if they don’t.

The crucial difference between managing a person’s money and holding it on trust, is ownership of the money. A manager doesn’t get to own it; a trustee does, albeit only on paper.

A trustee acting for an incapacitated person is in an enormously powerful position. And not regulated, other than by the law.

Power of Attorney

The individual chooses someone to act as them in the future when they think it is unlikely that they will always have capacity

The individual chosen to act in this way, can start straight away, as soon as the power of attorney is registered, unless the appointer says not to start unless or until some other check has been made.

The attorney owes a fiduciary duty to the donor.

Power of attorney

Status – statutory agent for the individual

Can survive supervening incapacity Registration necessary for validity Can be restricted by conditions re

scope and process Expensive Position of trust for the purposes of

the Fraud Act and criminal offences.

Duties of LPAs – what to ‘engage’ with them Duties of LPAs – what to ‘engage’ with them over, when investigating potential abuseover, when investigating potential abuse

Attorneys will owe specific Attorneys will owe specific dutiesduties (as opposed to (as opposed to discretionary duties) to the individuals they act for, which discretionary duties) to the individuals they act for, which are laid down in the Code of Practice as follows:are laid down in the Code of Practice as follows:

A duty to act where necessary, and take decisions A duty to act where necessary, and take decisions on behalf of the individual who lacks mental on behalf of the individual who lacks mental capacity to make those decisions him or herself;capacity to make those decisions him or herself;A duty to have due regard to the Code of A duty to have due regard to the Code of Practice;Practice;A duty to act lawfully as an agent;A duty to act lawfully as an agent;A duty to act within the scope of the A duty to act within the scope of the authority granted by the Court;authority granted by the Court;A duty to act with care and skill;A duty to act with care and skill;A duty to discharge a fiduciary duty;A duty to discharge a fiduciary duty;

Duties of LPAs (cont’d)Duties of LPAs (cont’d)

A duty not to delegate the authority given;A duty not to delegate the authority given;A duty of good faith;A duty of good faith;A duty of confidentiality;A duty of confidentiality;A duty to comply with the Court of Protection;A duty to comply with the Court of Protection;A duty to keep accounts; andA duty to keep accounts; andA duty to keep the individual’s money and A duty to keep the individual’s money and

property, property, separate from other moniesseparate from other monies..

Failure to adhere to these duties may end up in an Failure to adhere to these duties may end up in an Attorney having to answer to a Local Authority adult Attorney having to answer to a Local Authority adult abuse investigation, a Judge at the Court of Protection, abuse investigation, a Judge at the Court of Protection, or the Police.or the Police.

Signs that an attorney (or anyone else in a position Signs that an attorney (or anyone else in a position of trust) may be exploiting the donor/ownerof trust) may be exploiting the donor/owner

7.70 Code of Practice: signs include: 7.70 Code of Practice: signs include: stopping relatives or friends contacting the donor – for stopping relatives or friends contacting the donor – for

example, the attorney may prevent contact or the donor may example, the attorney may prevent contact or the donor may suddenly refuse visits or telephone calls from family and suddenly refuse visits or telephone calls from family and friends for no reason friends for no reason

sudden unexplained changes in living arrangements (for sudden unexplained changes in living arrangements (for example, someone moves in to care for a donor they’ve had example, someone moves in to care for a donor they’ve had little contact with) little contact with)

not allowing healthcare or social care staff to see the donor not allowing healthcare or social care staff to see the donor taking the donor out of hospital against medical advice, while taking the donor out of hospital against medical advice, while

the donor is having necessary medical treatment the donor is having necessary medical treatment unpaid billsunpaid bills (for example, residential care or nursing home (for example, residential care or nursing home

fees) fees) an attorney opening a credit card account for the donor an attorney opening a credit card account for the donor spending money on things that are spending money on things that are not obviously related not obviously related

to the donor’s needs to the donor’s needs the attorney spending money the attorney spending money in an unusual or in an unusual or

extravagant way extravagant way transferring financial assets to another country.transferring financial assets to another country.

Reducing the Reducing the riskrisk of Financial Abuse at the outsetof Financial Abuse at the outset

Financial assessment staff need to be rigorous Financial assessment staff need to be rigorous about checking a relative’s legal authority to put about checking a relative’s legal authority to put themselves forward as able to speak about the themselves forward as able to speak about the client’s assets and to assure the LA that charges client’s assets and to assure the LA that charges will be paid.will be paid.

Are they holders of EPAs, LPA’s (has the Are they holders of EPAs, LPA’s (has the instrument been registered?) or DWP appointees, instrument been registered?) or DWP appointees, or merely joint bank account holders? Are there or merely joint bank account holders? Are there conditions against use before incapacity, or to act conditions against use before incapacity, or to act jointly, or to get medical evidence, or limitations jointly, or to get medical evidence, or limitations to the authority to act as agent?to the authority to act as agent?

Charging departments: early flagging up on non-Charging departments: early flagging up on non-payment of fees will be the first stage in payment of fees will be the first stage in evidencing inappropriateness of a current evidencing inappropriateness of a current financial representative’s behaviourfinancial representative’s behaviour

The new Criminal Offence of wilful neglect The new criminal offence can be found under

section 44 of the Act. It permits the prosecution of anyone having the

care of a person’ (not defined in any rigid or exclusionary sense at all) who lacks mental capacity or is reasonably believed to lack mental capacity, or an LPA or a Deputy, or an EPA, if they ill-treat or wilfully neglect that person.

The maximum penalty for such an offence is a fine and/or up to 5 years in prison.

We do not know whether people who financially abuse, will be prosecuted under the new offence.

Ill-treatment seems tailor-made to cover financial abuse that is not actually dishonest, but merely exploitative of a person’s impairments, such as memory loss, or confusion.

The Fraud Act 2006The Fraud Act 2006 creates a new offence of ‘fraud by abuse

of position’

This new offence may apply to a range of people, including:

• attorneys under a Lasting Power of Attorney (LPA) or an Enduring Power of Attorney (EPA), or

• deputies appointed by the Court of Protection to make financial decisions on behalf of a person who lacks capacity.

Attorneys and deputies may be guilty of fraud if they dishonestly abuse their position, intend to benefit themselves or others, and cause loss or expose a person to the risk of loss.

People who suspect fraud should report the case to the police.

Financial Abuse and the MCA It is not a statutory ‘social services’ function to

prevent or investigate financial abuse. Everybody in the UK has the right to live their lives

free from abuse. This is underpinned by the Human Rights Act 1998 (including freedom from inhuman and degrading treatment) under Art 3 and the right to respect for private and family life under Art 8.

But because much financial abuse is a crime, no-one tends to think of it as a human rights issue.

If it’s really anyone’s job - other than the police’s function -(because sometimes they’re not permitted to see it as a crime at all, or won’t see it as one worth pursuing) then it is may be the Official Solicitor’s function, or a corporate local authority function, to take steps to prevent and manage it, through lawful interventions.

The extent to which these bodies take the initiative is broadly within their discretion, and will be affected by how other bodies, such as the Public Guardian, choose to discharge their own functions.

Financial Protection – civil law routes to avoiding transactions known to be

incapacitated If a transaction can be shown to have taken place at a time when

a person can be said to lack mental capacity, then it will be a voidable transaction, as a matter of law, where the other party knew or must have known of the incapacity.

The Official Solicitor can apply to have the transaction declared void. A Deputy could ask to be a litigation friend and do it instead. A local authority could take on the role if it wanted to and was not conflicted out of acting in this regard, for instance, by reason of disputed charges for the social services being provided.

Apparent agreements for the supply of ‘necessary’ goods or services are treated differently - the individual has a liability to pay a reasonable fee for the supply, despite their incapacity.

The definition of what is ‘necessary’ appears in the new Mental Capacity Act 2005 under section 7. That is, goods or services, which are suitable to the person’s condition in life and to his actual requirements.

Undue Influence – a means to avoid transactions made by merely vulnerable, not incapacitated, persons

Outside of cases of actual lack of capacity, the doctrine of Undue Influence can sometimes be an alternative ground for setting aside a transaction in civil law.

The doctrine of Undue Influence is a legal equitable concept which has been developed by the Courts over the years.

The constituent elements of the principle are these:‘Firstly the exploited person has capacity, otherwise it is arguable that he or she cannot be unduly influenced. Secondly, he or she is unduly influenced to enter into a transaction not of their own free will. Thirdly, the undue influence can be either express or presumed’.

Avoiding transactions for undue influence Undue influence can be ‘presumed’ if there was

evidence of a relationship of trust and confidence, and that relationship was exploited or involved in a questionable transaction.

(Examples of relationships of trust are the financial adviser/principal, the solicitor/client – and the trustee/beneficiary relationship).

If these factors can be established then it is the responsibility of the ‘abuser’ to give an innocent explanation – otherwise the transaction is set aside.

The ordinary courts will accept claims based on undue influence or lack of capacity – but the person needs to bring proceedings to sue, or get a litigation friend for these claims, if they’ve deteriorated.

The Official Solicitor The Official Solicitor is supposed to be there as LF for

incapacitated people. You can phone or write to the OS to ask.

Whilst it would be somewhat unusual for a Local Authority to act as a vulnerable person’s Litigation Friend to set aside a transaction under the doctrine of Undue Influence, it could be regarded as a useful and good thing to do, both for the individual and also for the Local Authority, if the transaction in question meant that the now incapacitated individual recovered funds to continue paying for some of their care.

In reality, the prospects probably depend on whether the person is eligible for legal financial support from the Legal Services Commission. The OS has a discretion to refuse to take on a case.

What powers have we actually got to help or manage money?

For capacitated people - Is helping a person sort out their money, capable

of being a social service in a care package? Is it “Practical assistance in the home”?

Is it a Supporting People service (implicitly dependent on the person wanting the help)?

For incapacitated people? Can it be done for an incapacitated person? Not

without other legal status. Can we contract for it or fund deputyship under

our well-being powers because it would be good for the area?

Even if we do contract for it, what use is it for the person if the person has a bank account out of which their charge or contribution must be managed?

Can providers ‘manage’ a budget? If the capacitated client chooses to have a direct

payment on paper and chooses the provider to do so, yes. That’s the provider becoming the chosen agent of the client.

If the client says no to a direct payment, and we do traditional commissioning, we might get a provider to agree to take the money along with a responsibility to work with the client in order to sub-contract out certain amounts of service or the funding. That’s not managing for the client though, that’s managing for us….and it requires the provider’s agreement.

Most providers feel a bit sick about doing their own organisation out of the service provision opportunities, but some can see scope for streamlining their overheads and keeping the service culture person-centred instead of dependent on what current staff are paid to offer.