The case of Re GM: MJ and JM v The Public Guardian (2013) MHLO 44 (COP) ("Re GM") emphasises the scope for financial abuse when deputies are managing a patient's financial affairs. A Law Society practice note, published recently, also highlights the risks of misuse when a person's financial affairs are being managed by another. Making a Lasting Power of Attorney ("LPA") can help reduce the risk of such abuse and should be considered as an essential part of your estate planning.

Re GM is a case concerning the appropriateness of certain gifts made by two deputies on behalf of their patient. A deputy is a person appointed by the Court of Protection to manage the financial affairs of someone who has lost mental capacity. A deputy is appointed where there is no valid LPA in place.

In this case, the deputies made gifts to themselves and other family members and charities totalling around £230,000, about half of the patient's wealth, without consulting the patient. One of the deputies gave themselves £20,000 in cash, an Alexander McQueen designer handbag, a Rolex watch, a ring and gifts to the other deputy worth more than £48,000.

Deputies (and attorneys) are authorised to make gifts on behalf of a patient, but only in restricted circumstances and the gift must always be in the patient's best interests. In Re GM, Senior Judge Lush listed the considerations that should be taken into account when a deputy is making a gift, and these include: (i) having regard to the patient's financial position; (ii) the extent to which the patient was in the habit of making gifts of a particular size or nature; and (iii) the possibility that the patient may require future residential or nursing care, among others. Furthermore, a gift must be approved in advance by the Court of Protection if it is above a de minimis threshold.

The deputies in the Re GM case were stripped of their deputy roles.

Ann Stanyer, a partner in the private team at Wedlake Bell and a specialist in elderly client and Court of Protection work, commented that: 'These people were in a position of trust and the court has found that they helped themselves to the assets they were supposed to be managing. There are very strict rules, clearly, against what can be given as gifts and claimed as expenses to prevent this sort of behaviour. The deputies in this case apparently ignored them and have got away with it. This sets a deeply concerning precedent.'

You can read more here about the Re GM case and Ann Stanyer's commentary in this Citywire article.

The Re GM case highlights the potential for abuse when deputies are managing the financial affairs of a vulnerable person. This can be particularly so because the deputies have been appointed by the court, not the vulnerable person, meaning that they may not necessarily be those that the vulnerable person trusted when she or he had capacity.

The Law Society published on 13 June 2013 a practice note on Financial Abuse, reminding solicitors that they have a responsibility to be aware of financial abuse and to work and plan together with clients to prevent it. One example given in the practice note of action that can be taken to prevent the risk of financial abuse is to make an LPA.

An LPA allows you to select the persons (attorneys) who will manage your affairs in the event of loss of mental capacity and also provide guidance and/or restrictions on what they can and cannot do with your assets, including gift-making. A LPA can be made at any time whilst a person has mental capacity. We advise that an LPA is considered at the same time as making a Will and treated as an essential part of your estate planning. If you do not have anyone that you wish to appoint as an attorney but still want the level of protection that an LPA affords, a partner at Wedlake Bell who is experienced in Court of Protection matters can act as an attorney for you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.