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How to manage your parent’s financial affairs

Associate Solicitor Stuart Adams, from Penningtons Manches LLP, shares his advice on how to deal with organisations such as banks, building societies and utility companies on your parent’s behalf when there is no Power of Attorney in place.

While it’s your parent’s right to manage their own financial affairs, advancing age, illness or disability can mean they’re no longer able to do so for themselves. If you’re stepping in to help ease the burden you may find that while companies can be sympathetic to your circumstance they also want to protect against fraud which can feel like they’re imposing unhelpful barriers.

Verbal and written permissions

Organisations may speak to you on the phone as a one off providing your parent has given verbal permission as the account holder. It’s unlikely that they’ll permit you to make any substantial changes to the account, policy, etc. and even more unlikely that they’ll allow you to continue to deal with them on over the phone.

This is understandable as, notwithstanding the number of security questions asked, the organisation could not be certain that they were dealing with the correct account holder or that you weren’t taking advantage of your parent (aka ‘undue influence’). If anything were to go wrong, the organisation would be first in the firing line.

If you need to speak more frequently to an organisation on your parent’s behalf then it may be possible to continue to do so if you supply them with a letter of authority from the account holder – your parent’s written permission.

The letter would be signed by the account holder stating that they (in their name as it appears on the account, policy, etc.) authorise you (full name and address) to discuss all matters relating to the account, policy, etc. and that they grant you authority to provide instructions on their behalf.

You may find that this method of authorisation is not always accepted as, again, it’s impossible from the organisation to be certain that the account holder has signed the letter of authority themselves.

Managing financial affairs on a temporary basis

Banks will generally accept a written authority via a specific document called a ‘Third Party Mandate’. Simply put, an account holder can complete a Third Party Mandate which tells their bank that they would like to give another person access to their bank account and the right to operate it on the same terms that they enjoy.

If the above options are not acceptable to the organisation you’re attempting to deal with on your parent’s behalf then an Ordinary Power of Attorney (OPA) can be a helpful short term solution. A Power of Attorney is a legal document by which one person, the donor, authorises another (or others), the attorney, to make certain decisions or carry out acts on their behalf.

An OPA can be either specific, which allows an attorney to carry out one or more specified activities, for example, operating a bank account or dealing with the sale of a property, or more commonly it can be general permitting the attorney to do anything (within legal limits) on behalf of the donor. In the latter case the OPA is often referred to as a ‘general’ power of attorney.

When the OPA (or a certified true copy) is lodged with an organisation, the donor is letting them know that they are happy for their attorney to carry out everyday transactions on their behalf or as otherwise limited by the scope of the OPA. An OPA can last for no longer than 12 months, although it can be renewed every year indefinitely.

The major benefit of an OPA is its simplicity – the form itself (which is prescribed by statute ) is no more than a few paragraphs in length. However, the major drawback is that if the person granting the power loses mental capacity the OPA will automatically come to an end, which is true of any written authority or Third Party Mandate. This often occurs at a time when the attorney has a pressing need to act to completely a time sensitive transaction like the sale of a property for example.

There is no unified policy for dealing with third party authorisations so I would strongly recommend contacting the respective organisations and enquiring as to their policies for dealing with third party authorisations.

Managing financial affairs on a long term basis

In the long term, the only real solution is a Power of Attorney that can withstand the donor’s loss of mental capacity. Anyone aged 18+ can make a Power of Attorney as long as, in particular, they understand what they are signing (e.g. they have mental capacity).

A parent who’s mildly intellectually disabled or in the early stages of dementia etc. may still be able to make a Power of Attorney, but if their capacity is in doubt then an assessment of their understanding should be conducted by an appropriate person, such as a psycho-geriatrician. With that in mind, the best advice is to set up the Power of Attorney early and thereafter it can lie dormant and be ready to be used should the need arise.

If an EPA (registered or otherwise) or a registered LPA has been set up with you as attorney for your parent (the donor) then all you’ll have to do is lodge it with the organisations you need to deal with on your parent’s behalf. If you’re dealing with many companies you can produce certified copies of the Power of Attorney to hopefully make the whole process smoother and swifter.

State pension and benefits

If your parent is incapacitated and entitled to a retirement pension and/or other state benefits, the Department for Work and Pensions can choose an ‘appointee’ to receive those benefits on their behalf. The appointee can be a relative, friend, someone from the caring professions or the Local Authority, who will be required to produce proof of the recipient’s incapacity (e.g. a doctor’s note).

Final advice for managing financial affairs

Although it may be possible to get by with informal authorisation from your parent or temporary legal documents, a Power of Attorney is the preferred choice in terms of future planning. The risk of supervening mental incapacity grows through longevity, but through illness or accident it can hit at any time.

Consulting a lawyer is usually the best way to ensure that legal documents such as Powers of Attorney are correctly set up and that applications to the CoP are made in the best interests of your parent.

When choosing a lawyer it’s always a good idea to ask for a clear indication of their charges upfront as well as consider how accessible their offices are and how much experience they have in this specialist area of law.

If you’re looking lawyers who provide specialist legal advice for older and vulnerable people, their families and carers Solicitors for the Elderly (SFE), an independent and national organisation of solicitors, barristers and legal executives, has a directory of lawyers you can search by location.

Stuart Adams is an Associate Solicitor in the Private Client & Tax team at Penningtons Manches LLP and a full professional member of Solicitors for the Elderly. 

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