Moves by the UK government to fully digitise lasting power of attorney found it was important to retain a ‘wet signature’ to protect the elderly from financial abuse

Date: 30 Sep 2015

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Julia Abrey, head of the Withers Elder Law team, says UHNWs would be well advised to appoint more than one attorney following the reported case of financial abuse of L’Oreal heiress Lilane Bettencourt.

I hear about cases of financial abuse of mentally incapacitated people.  Are UHNW clients exposed to abuse to the same extent?

UHNW clients may be less likely to be subject to financial abuse as they may have financial and legal advisers who will have helped them to put in place the most appropriate safeguards to protect them, should subsequent incapacity render them vulnerable in the future, for example, a financial lasting power of attorney (LPA). However, as seen in the case of the L’Oreal heiress Liliane Bettencourt, whose advisers were accused of financially abusing her after she had lost mental capacity, the selection of an absolute trustworthy attorney is key. It may well be advisable to appoint more than one attorney as an additional safeguard.

How can mental incapacity interfere with succession planning?

An attorney under a financial LPA has a wide range of general asset management powers. However, estate and succession planning often involves some form of gift, either during life or by will. Attorney’s powers to make gifts from funds they hold for the maker of an LPA are very limited: estate planning gifts usually require the blessing of the court of protection. An attorney also does not have the power to make a will for the persons for whom they are acting. Only the court of protection can do this.

How should representation be structured when assets are in different jurisdictions?

Ensuring that the appropriate powers of attorney are in place where an individual has assets in more than one jurisdiction can be challenging. Not all jurisdictions have some kind of lasting or durable power of attorney as part of their law, and ensuring that a power of attorney made in one country will be recognised in another can be complex. The law in relation to mental capacity and durable powers of attorney is, however, developing and some countries are updating their mental capacity legislation. To give an example, Singapore’s Mental Capacity Act 2008 brought their law up to date and the Irish Assisted Decision-Making (Capacity) Bill published in 2013 will, once it has been enacted, be a cutting edge piece of legislation in this area of the law.

Are there any plans to harmonise the legislation internationally?

Hague Convention 35 concerning the rights of vulnerable persons is one of a number of conventions produced by the Hague Conference on private international law which, recognising the issues of differences in law between states, seek to develop cross-border agreements that respond to global needs. Hague Convention 35 concerns the international protection of adults who, by reason of an impairment or insufficiency of their personal faculties, are not in a position to protect their interests. Only a limited number of countries have both signed and ratified Hague 35 enabling mutual recognition of orders relating to incapable adults made in each other’s countries. Further countries signing and ratifying this convention would aid cross-border recognition in this area of the law.

The UK government is digitising the process for making a lasting power of attorney. Tell me about that.

LPAs are increasingly popular in England and Wales and the government wishes to encourage more people to make them. A digital lasting power creation system was trialed successfully by the office of the public guardian and is now in full use. Although an LPA can be drafted digitally, it must still be printed, signed and witnessed before it can be registered and become valid. Dropping the requirement for what is known as a ‘wet signature’ was felt to be too risky, particularly for elderly or vulnerable clients.

What trends do you see in the sector?

The increasing internationalisation of wealth coupled with the prevalence of dementia in older people creates challenges and opportunities for the advisor to ensure that the right powers of representation are in place in different jurisdictions and that they all work together.
The complexities arising from wealth and the need for sophisticated solutions in the context of anticipated incapacity are, however, being recognised by the court of protection. A recent case before the court considered a lasting power of attorney made by a UK resident with significant assets in England, Wales and elsewhere. It contained a number of detailed additional provisions to ensure that his wealth would be managed as he wished should he become incapable. Although the provisions were lengthy and complex and, as the court commented, might in practical terms not be very easy to operate, the provisions were in accordance with the Mental Capacity Act 2005 and should therefore be recognised as valid.