Conflict Of Interest Power Of Attorney

A Power of Attorney (POA) is a legal arrangement that allows an individual (the “donor”) to appoint one or more trusted persons (the “attorneys”) to make decisions on their behalf, often during times of mental or physical incapacity. While this legal tool can provide peace of mind, it also introduces the potential for conflicts of interest, especially where the attorney’s personal interests might clash with their duties to the donor.

In this article, we will explore what constitutes a conflict of interest in the context of a Power of Attorney, how to recognise it, and what steps can be taken to mitigate potential conflicts. Understanding these nuances is crucial for both donors and attorneys to ensure the donor’s best interests are upheld.

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What Is a Power of Attorney?

A Power of Attorney grants legal authority to one or more individuals (attorneys) to act on behalf of the donor. There are two main types of Lasting Powers of Attorney (LPAs) in England and Wales:

1. Property and Financial Affairs LPA: This allows attorneys to manage the donor’s finances, including bank accounts, investments, property, and paying bills. The attorney can act as soon as the LPA is registered, with the donor’s permission, or when the donor no longer has mental capacity.
2. Health and Welfare LPA: This allows the attorney to make decisions about the donor’s health and personal welfare, such as medical treatment, care arrangements, and life-sustaining treatment, but only when the donor has lost capacity to make these decisions.

A third, now largely replaced by LPAs, is the Enduring Power of Attorney (EPA), which only covers property and financial affairs and is valid for those created before October 2007.

What Is a Conflict of Interest?

A conflict of interest arises when an attorney’s personal interests or relationships may interfere with their ability to act in the best interests of the donor. Attorneys have a legal duty to act with complete loyalty to the donor, adhering to their wishes and acting solely in their interests. When an attorney’s own interests, or the interests of someone close to them, potentially or actually influence their decision-making, a conflict of interest occurs.

For example:

• Personal benefit: If an attorney is faced with a decision that may financially benefit them or a close relative, this can create a conflict. An attorney may be tempted to make decisions that favour themselves, even if it is not in the donor’s best interests.
• Business relationships: If the attorney has a professional or business relationship that could benefit from decisions made on behalf of the donor, this can also present a conflict.
• Family dynamics: Attorneys who are family members may face conflicts between their personal feelings or relationships with other family members and the donor’s best interests. For example, disputes over inheritances or disagreements about care decisions could lead to conflicts.
• Acting as a beneficiary: An attorney may be a beneficiary under the donor’s will. While this in itself is not a conflict, problems can arise if the attorney makes financial decisions that could increase the value of their inheritance or makes decisions that benefit them rather than the donor.

Responsibilities of Attorneys

Attorneys are legally bound to follow certain principles and standards when managing the donor’s affairs, set out by the Mental Capacity Act 2005 and the Office of the Public Guardian (OPG).

1. Act in the donor’s best interests: This is the primary duty of an attorney. Every decision made by the attorney must be for the donor’s benefit and take into account their wishes, feelings, values, and beliefs.
2. Avoid conflicts of interest: Attorneys must avoid situations where their own interests, or the interests of others, could conflict with their duty to the donor. Even the appearance of a conflict can undermine the trust placed in the attorney.
3. Act honestly and transparently: Attorneys should keep records of all decisions and transactions carried out on behalf of the donor. This is especially important for financial decisions, where transparency is critical in avoiding conflicts.
4. Maintain the donor’s privacy: Attorneys must keep the donor’s information confidential and avoid disclosing personal details unless absolutely necessary.

How to Identify and Avoid Conflicts of Interest

It is essential to recognise potential conflicts of interest early and take steps to prevent them from affecting decisions made on the donor’s behalf. Here are some common scenarios and how to handle them:

1. Financial Transactions Between Attorney and Donor

If the attorney is involved in any financial transaction with the donor, such as borrowing money, selling property, or gifting, it can easily lead to a conflict of interest.

Solution:
In this scenario, it is advisable to seek professional legal advice or involve a neutral third party to oversee the transaction. The attorney should ensure that any financial decisions benefit the donor and are made transparently. In some cases, court approval may be necessary to ensure that the transaction is above board and in the donor’s best interests.

2. Gifts and Donations

An attorney is allowed to make gifts on behalf of the donor under very limited circumstances, such as on customary occasions (birthdays or anniversaries), but these must be reasonable and in line with what the donor might have given themselves.

Solution:
The attorney must always consider whether the gift is in line with the donor’s history of giving and whether it affects the donor’s financial position. If there is any doubt, the attorney should apply to the Court of Protection for approval.

3. Care and Living Arrangements

For a Health and Welfare LPA, conflicts of interest can arise when deciding on care or living arrangements. For example, if an attorney has a financial interest in a care home or stands to benefit from the sale of the donor’s property to pay for care.

Solution:
The attorney must base decisions on the donor’s needs, preferences, and quality of life. Any decision that could benefit the attorney financially should be approached cautiously, and legal advice should be sought to avoid breaching duties.

What Happens If a Conflict of Interest Arises?

If an attorney acts in their own interest rather than in the donor’s, they could be in breach of their legal duties. In serious cases, the following actions may be taken:

• Complaint to the Office of the Public Guardian: The OPG can investigate claims of misconduct or conflicts of interest. They have the power to reprimand the attorney, require repayment of funds, or refer the case to the Court of Protection.
• Removal of Attorney: If the conflict of interest is severe and the attorney is unable or unwilling to act in the donor’s best interests, the Court of Protection can remove the attorney and appoint a deputy to take over the donor’s affairs.
• Legal consequences: In cases of deliberate mismanagement or exploitation, the attorney may face civil or criminal penalties, including repayment of misappropriated funds, fines, or even imprisonment.

Preventing Conflicts of Interest: Guidance for Donors and Attorneys

Both donors and attorneys can take steps to prevent conflicts of interest from arising in the first place:

For Donors:

• Choose your attorney(s) carefully: When selecting attorneys, consider individuals who are likely to act with integrity and who understand your wishes. If you are concerned about potential conflicts, you may want to appoint more than one attorney and require them to act jointly.
• Be clear about your wishes: Set out specific instructions or preferences in the LPA document to help guide your attorney’s decisions. This can include wishes about financial management, care arrangements, or the giving of gifts.
• Seek professional advice: A solicitor can help you create an LPA that is tailored to your specific needs and minimises the risk of conflicts.

For Attorneys:

• Understand your duties: Ensure you are fully aware of your legal responsibilities under the Mental Capacity Act 2005. Acting in the donor’s best interests should always be the priority.
• Maintain transparency: Keep clear and detailed records of all decisions and transactions. This will protect you in case of any future disputes or accusations of misconduct.
• Avoid making assumptions: Don’t assume that your personal beliefs or preferences align with those of the donor. Always try to follow their expressed wishes and beliefs.

Conclusion

Conflicts of interest in the context of a Power of Attorney can complicate the relationship between a donor and their attorney, but with proper awareness and careful management, they can be avoided. By understanding the duties and responsibilities involved, attorneys can ensure that they act in the best interests of the donor at all times.

How we can help

We have a proven track-record of helping clients create a lasting power of attorney. This also includes all the different types, even if you need more than one. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of creating a Lasting Power of Attorney. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.

To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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