In recent years, there has been a rise in the number of multigenerational households – homes where three or more generations of a family live under one roof. An aging population and increasing care (and childcare) costs are driving families to reconsider how they live and support one another.
However, those who act for parents under a Lasting Power of Attorney (LPA) and seek to jointly purchase a home with their parent, to live with them and provide support, can, despite the best of intentions, unwittingly find themselves in breach of their duties as an attorney, which can have serious consequences.
Case study
Anna is the attorney for her father, David under a LPA for property and finances.
David has recently suffered from confusion and memory loss and his GP suggested he may have dementia.
Anna is worried about David living alone and wants to buy a larger home so she and David can live together, and she can support David and provide care.
Anna has planned to sell her home and David’s and pool their money to buy a bigger house. David has indicated that he would like to do this also.
Can Anna take this step on behalf of David?
An LPA enables a person (the donor) to appoint someone they trust (the attorney) to make decisions on their behalf if they lose the mental capacity to do so. This can include selling their property and buying property on their behalf.
It is important as a first step that Anna confirms if David has capacity to decide to sell his property and buy another. Capacity is always presumed until proved otherwise and is decision specific. Just because David has suspected dementia, this does not mean that he lacks capacity to decide to sell his home and buy one with Anna.
If Anna is concerned that David lacks capacity to make this decision, she should arrange for him to be assessed by an expert assessor or his GP (if they are willing to complete this assessment).
If David has capacity to make the decision to sell his home, that is his decision to make. However, we would strongly recommend that both Anna and David receive separate legal and financial advice on the impact of selling his home in such circumstances.
If David lacks capacity to decide to sell his home and purchase another, Anna would need to proceed with care; there are several risks to her as set out below.
Risks to Anna in acting on David’s behalf
An attorney has a duty to act in the best interests of the donor at all times and not put themselves in a position where their duties conflict with the donor.
Entering a property transaction where Anna would seek to benefit personally (even if this transaction mainly benefits David) creates a position where Anna and David’s interest are in ‘conflict’.
Attorneys are prohibited from benefiting from their position unless this is clearly authorised in the LPA document itself or by the Court of Protection.
Therefore, Anna could be considered in breach of her duties as an attorney if she went ahead with the sale and purchase.
Even though Anna is acting in good faith she would therefore be exposing herself to allegations of financial abuse, particularly from other family members or anyone who is due to inherit from David’s estate after his death. It may be that if David needs to go into care the local authority could raise concerns about the transactions.
This can lead to:
- Investigations by the Office of the Public Guardian (OPG) that could result in revocation of the LPA.
- Legal proceedings for breach of fiduciary duty being brought against Anna.
- Claims made against Anna after the death of David by those who may have expected to inherit David’s home.
- If the local authority suspects there has been a deprivation of assets, they may seek to challenge the transaction if David applies for means-tested care.
Legal action against Anna, either before or after the death of David, may lead to the property purchase being voided, and Anna could be held personally liable for any financial loss suffered by David.
What can Anna do to mitigate such risks
- Ensure that David’s capacity is properly assessed to see if he can make these decisions on his own and if he can, he should seek independent legal and financial advice.
- Anna should seek her own independent legal advice on her position and the risks to her and if the decision to jointly purchase with David can be considered in his best interests (should he lack capacity).
- Apply to the Court of Protection if David lack’s capacity to make the decision for authorisation (if so, advised by a specialist legal advisor). The court will scrutinise whether the transaction truly benefits David and whether any undue influence or coercion is involved. If it is satisfied it is in the best interests of David, they will ‘approve’ the sale and joint purchase.
- Maintain transparency, keeping thorough records and communicating with other family members or interested parties.
Conclusion
While it may seem practical and generous for an attorney to buy a jointly owned property with the donor of a LPA, the decision to do so is fraught with risk. Attorneys must tread carefully, ensuring they always act within the scope of their legal powers, avoid conflicts of interest, and prioritise the donor’s welfare above all else.
When in doubt, professional legal guidance and, if necessary, Court of Protection approval is essential to protect both the donor’s rights and the attorney’s position in such a situation.
If you would like to know more, or need advice please get in contact with our Inheritance & Trust Disputes team or call us on 0345 540 5558.