Excessive cash withdrawals by Attorney lead to fraud charge

It is not uncommon for Attorneys appointed under a Lasting Power of Attorney (or its predecessor, an Enduring Power of Attorney) to consider making gifts on behalf of a Donor with a view to reducing his or her potential Inheritance Tax liability.Although it is possible to make very modest gifts, often limited to the seasonal gifts that one might make for Christmas or birthday; making use of the annual allowance of £3,000 per annum is not possible without the specific consent of the Court.Even if the Donor was making such gifts on a regular basis prior to their loss of capacity, it is not possible for Attorneys to continue making such gift unless the Court has approved.

One of the consequences of an Attorney exceeding his or her authority could be realised at the time of dealing with an individual’s estate.At that time the Revenue will ask to see a copy of the Power of Attorney and will then look to see what gifts have been declared being made during the last seven years.If the Donor had lost capacity and gifts were continuing to be made the Revenue may argue that the gifts are void and the value should be aggregated to the estate, with a result that the additional Inheritance Tax will be payable, plus there will be the potential for interest and penalties.

Matters could be even worse if there is evidence that there is a general deficiency in a Donor’s funds because an Attorney has been withdrawing excessive sums from his or her account.In the case of R v TJC [2015] EWCA the Court of Appeal (Criminal Division) held that in such circumstances the Attorney would be guilty of an abuse of position under Section 4 of the Fraud Act 2006.

In this case the withdrawals being made by the Attorney were unreasonably high given the needs of the Donor.The conclusion was that the Attorney could not have been acting honesty when managing the affairs of the Donor.

It is easy to believe that as an Attorney, you are, in effect, standing in the same shoes as the Donor, and can act as he or she would do.However, that is not the case and it is important for the Attorneys to remember that they must always act in the best interest of the Donor.

For advice on Lasting Powers of Attorney or issues around mental capacity, please contact Richard Horwood.