Is now the time for compulsory bonds protecting against mismanagement of Powers of Attorney in Scotland?
The benefits of Power of Attorney (PoA) are well-documented. Its limitations and risks perhaps less so and, unfortunately, meaningful solutions are not readily discussed.
Most negative perceptions associated with PoA – that it is open to abuse and misuse – only apply in a small minority of cases. By far the bigger problem is inadvertent mismanagement.
Why? Typically, it is because the knowledge and skills of attorneys vary enormously and can shift over time. Mismanagement can happen when the attorney has misunderstood or underestimated their responsibilities, or when their ability to carry out the wishes of the granter has altered due to changed circumstances.
In her recently published book Power of Attorney, the former Public Guardian in Scotland, Sandra McDonald, sums up the position very succinctly:
The vast majority of attorneys bend over backwards to do a sterling job but they may, innocently, overlook something which leads to a loss of money that you would have been due. There are a small number of attorneys who become tempted by the money available to them and use it for their own purposes.
One way to mitigate against uncertainty in relation to estates or financial affairs is to offer protection through bonds or other insurance products.
Savendale, a leading provider of insurance services to the Scottish private client solicitors sector, believes that a £50 compulsory Power of Attorney bond is a solution that merits further consideration.
Ian Burrell, Savendale Managing Director, joined forces with bond underwriting experts CLS Property Insight (CLS PI) last year to create Savendale powered by CLS PI. With a focus on private client solicitors and their needs, Ian and the CLS PI underwriting team have rapidly become the voice of authority on product developments that would benefit the management of Scottish estates.
The company has established a presence in the area of assisting Adults With Incapacity (AWI), highlighted by Ian’s recent participation in the Law Society of Scotland’s AWI, Guardianship and Elder Client Conference (alongside CLS PI’s Underwriting Director, Roy Partington) and the Scottish Paralegal Association Conference.
It is also an approved provider of Guardianship Bonds – which fulfil the same function as Power of Attorney – by the Office of the Public Guardian.
Ian understands that there can be valid objections to a PoA bond. However, he believes they are outweighed by the fact that appointing PoA is generally based on two concepts which are prone to unforeseen errors of judgement – firstly trust and, secondly, assuming an understanding of future events.
“The overriding objection to a POA bond is the belief that no one would give power of attorney to someone that they do not trust. Of course, this is not always how events play out.
“For example, parents are prone to appoint all of their children as PoA even if they implicitly believe one or other of the children is more competent or trustworthy in dealing with financial matters.
“And we know that it may be some years down the line before a PoA is put into effect – by which time the circumstances of the attorneys may have changed significantly, to the extent that it influences their decisions in dealing with the granter’s affairs.
“Another issue is that at the point the PoA is set up, the granter can’t conceive of its powers ever being needed because they cannot allow themselves to think that they are going to suffer from dementia.”
“Unfortunately, that’s simply not the case and there are many who will need to grant those powers. There are thought to be 90,000 people in Scotland living with dementia and that number is expected to rise to 164,000 by 2036. In the UK, more than 525,000 people have a dementia diagnosis.”
These misconceptions mean potential granters will continue to have doubts about PoA, putting significant barriers in place against the establishment of a bond solution.
Ian Burrell believes that those barriers could be overcome with Government backing and a compulsory product. He explained:
“We support the introduction of a compulsory bond but, without Government backing, it is undeliverable because the product would be ‘selected against’ in the market – that is, only those who had cause to think that there might be a problem at some point in the future would take out the product.”
Granting PoA should provide peace of mind but when a mechanism designed to offer protection is instead associated with risk, it is difficult for solicitors to make that system work for their clients.
A compulsory, affordable bond to secure PoA may be one way to make the process of protecting adults with incapacity – their wishes, finances, and assets – more robust.
Such a solution would require engagement from solicitors, clients and the authorities with insurance providers.
There are many stakeholders in the PoA debate. We would like to hear from all of you. Tell us what you think when it comes to PoA – what issues have you encountered and how do you think they could be overcome?
For any further information about Savendale Powered by CLS PI, please visit our website.
This article was submitted to be published by CLS Property Insight as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.