Power of attorney rules leave vulnerable penniless
Two years after new Powers of Attorney rules became law, vulnerable people and their families are still at the mercy of banks and other financial institutions.
In one instance, an elderly woman's care home fees have not been paid due to an action by a bank clerk which the family cannot challenge. The woman could face eviction from her home.
When "Lasting Powers of Attorney" replaced "Enduring Powers of Attorney" on October 1, 2007, charities, the government and lawyers hailed it as a major advance. The previous system had become chaotic with no two banks - or even bank branches - interpreting the documents in the same way.
"While it's understandable that banks must protect elderly and other people who are not in full possession of their faculties, to do so in a way that causes pain both to the person supposedly being protected and to that person's family is unforgivable," says Adam Walker of Final Duties, a company that advises on probate and related issues. "One of our clients has been affected directly by this. We - and charities involved in the area - are also aware of many other problems."
Maria Smith (not her real name) suffers from Alzheimer's. The family believed she was covered under an old style enduring power of attorney (which remain valid).
She is still able to sign cheques but in July, she mistakenly signed a cheque as Maria Smith rather than M. Smith.
Her bank (Natwest) refused to pay the cheque and asked her to visit her local branch to sign a new signature mandate.
She visited Natwest with her son to do this. But during the meeting, she made a confusing reference to her late husband.
A bank clerk immediately decided she did not have sufficient mental capacity to continue to operate her bank account.
"The bank has not disclosed what training this clerk had in diagnosing mental capacity but as a result the account was frozen immediately pending production of a valid power of attorney," says Walker.
The bank asked for a copy of the power of attorney which was sent. But this covered both her and her late husband.
In mid August, NatWest wrote to say it required her late husband Robert to 'call into the branch with identification and address verification to complete the necessary power of attorney form' even though the bank was fully aware that Robert had died in May 2008.
"This caused further anguish to the family," says Walker. "The bank's legal department said in a separate letter that the old power of attorney had become invalid on her husband's death. But the real hurt was that with her account frozen, Maria could not pay her £6,500 a month care home bill.
The bank said no money would be paid until it received a new power of attorney which takes up to eight weeks. But as Maria already suffered from dementia, her signature may not be accepted so she would have to wait for a guardianship order from the Court of Protection which can take six months.
"The bank is insensitive. It knows she has made a regular care home payment via direct debit for the past 18 months so why can't that continue as it is obvious what it is? If she fails to pay this, she runs a real risk of eviction. This protects no one except the bank branch which took the decision. The bank refuses to discuss this with the family," says Walker.
"She also has £400,000 trapped in a non-interest bearing account due to the freeze," he adds. 'The new legislation is not working as it was intended. It was supposed to improve matters both for the vulnerable person and for families. The rules need to be applied with more common sense'.
Nearly two months later, the family is still in the dark. And Maria only remains in her home due to the ability of her family to fund the fees.
Other problem areas include:
In one instance, an elderly woman's care home fees have not been paid due to an action by a bank clerk which the family cannot challenge. The woman could face eviction from her home.
When "Lasting Powers of Attorney" replaced "Enduring Powers of Attorney" on October 1, 2007, charities, the government and lawyers hailed it as a major advance. The previous system had become chaotic with no two banks - or even bank branches - interpreting the documents in the same way.
"While it's understandable that banks must protect elderly and other people who are not in full possession of their faculties, to do so in a way that causes pain both to the person supposedly being protected and to that person's family is unforgivable," says Adam Walker of Final Duties, a company that advises on probate and related issues. "One of our clients has been affected directly by this. We - and charities involved in the area - are also aware of many other problems."
Maria Smith (not her real name) suffers from Alzheimer's. The family believed she was covered under an old style enduring power of attorney (which remain valid).
She is still able to sign cheques but in July, she mistakenly signed a cheque as Maria Smith rather than M. Smith.
Her bank (Natwest) refused to pay the cheque and asked her to visit her local branch to sign a new signature mandate.
She visited Natwest with her son to do this. But during the meeting, she made a confusing reference to her late husband.
A bank clerk immediately decided she did not have sufficient mental capacity to continue to operate her bank account.
"The bank has not disclosed what training this clerk had in diagnosing mental capacity but as a result the account was frozen immediately pending production of a valid power of attorney," says Walker.
The bank asked for a copy of the power of attorney which was sent. But this covered both her and her late husband.
In mid August, NatWest wrote to say it required her late husband Robert to 'call into the branch with identification and address verification to complete the necessary power of attorney form' even though the bank was fully aware that Robert had died in May 2008.
"This caused further anguish to the family," says Walker. "The bank's legal department said in a separate letter that the old power of attorney had become invalid on her husband's death. But the real hurt was that with her account frozen, Maria could not pay her £6,500 a month care home bill.
The bank said no money would be paid until it received a new power of attorney which takes up to eight weeks. But as Maria already suffered from dementia, her signature may not be accepted so she would have to wait for a guardianship order from the Court of Protection which can take six months.
"The bank is insensitive. It knows she has made a regular care home payment via direct debit for the past 18 months so why can't that continue as it is obvious what it is? If she fails to pay this, she runs a real risk of eviction. This protects no one except the bank branch which took the decision. The bank refuses to discuss this with the family," says Walker.
"She also has £400,000 trapped in a non-interest bearing account due to the freeze," he adds. 'The new legislation is not working as it was intended. It was supposed to improve matters both for the vulnerable person and for families. The rules need to be applied with more common sense'.
Nearly two months later, the family is still in the dark. And Maria only remains in her home due to the ability of her family to fund the fees.
Other problem areas include:
- high legal and registration fees for the Lasting Powers of Attorney process can put off families from completing the applications until it is too late - only those who are legally competent can hand over their affairs via an LPA - the old enduring power of attorney was effectively free although some lawyers made a small charge for the document.
- Finances frozen during LPA or Guardianship procedures can lead to losses in falling markets.
- Confusion between the LPA for health and welfare matters and that for financial matters
- The LPA does not always prevent abusive relatives gaining control over someone's affairs. Other family members find it difficult to rescind an LPA
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15:39
