Can a power of attorney borrow money to buy a property?

[delboy1984]

First time posting on this forum so apologies if I've posted in the wrong place.

My question is in the title really - can a power of attorney borrow money from her donor to buy property?

Bit of back story...
Donor had an accident at work, resulting in a serious head injury which meant that she is now never able to work again. She was given a large sum in compensation. Due to the donor not being mentally capable to purchase a house for herself and spending money willy-nilly she appointed her sister as power of attorney to deal with these issues. Fast forward a few years and now the POA is borrowing money from the donor to buy a house. Prior to the agreement the POA was in quite a dier financial situation - credit card, overdraft debt. The POA is saying that she has to pay back the loan to the donor at an agreed amount each month.

My issue is is that since the POA has borrowed the money she's bought a property, paid off her debt and has been spending excessively (gone on holiday etc). My question is - is this legal? If the POA is saying that the donor has agreed to this loan and she has her signature is this allowed? Morally I think it's not right but legally is she allowed to loan money from her sister to benefit herself (with no benefit to the donor) and pay her back?

Any advice would be greatly appreciated :-)

Very interested in this. My 2x DBs and I have LPA for my mother. We have been told we must always act in DM best interests (she has Alzheimer’s) and that may not be what she would have done before she lost capacity - a lot of parents will act in their children’s best interests rather than their own.

DM was paying school fees for one of DB’s children, since before capacity was lost. This had to stop as although DM intended to carry on until child was 18, it was not in HER best interests. My DB had to pull the children out of their school.

i cannot see how it can be in the donor’s best interests, so why would this be OK?

This is all a muddle. As @prh47bridge says, a donor can choose to allow an attorney to act for them financially before they lose capacity. In that situation, the attorney must act according to the donor's instructions or wishes.

Once they have lost capacity, an attorney must act in the donor's best interests. They must also only make decisions where the donor has no capacity. Capacity is decision specific, and the attorney must make every effort to allow the donor to have capacity. For example, if certain medicines make the donor drowsy in the afternoon, then they need to have discussions about these matters in the morning, rather than just deciding for the donor.

It is quite possible that the donor had enough capacity to decide to give her sister the loan. Capacity isn't about making wise decisions. It's simply about being able to understand the decision to be made, hold the information long enough to consider it, weigh up the options, and communicate their decision.

The sister, in asking for the loan, isn't acting as an attorney. If the donor still has capacity, she is free to agree to the loan.

However, it sounds like you doubt capacity, and in that situation, you would be best to raise it with the OPG. They can investigate.

Be prepared that if the donor was found to have capacity, it may be deemed that it was her decision to make and nothing can be done.

Capacity can be a really tricky area, too. For example, DD1 has been formally assessed as having capacity to ask me to manage her money, but not capacity to deal with her own money. So the SW has said that she can give me POA and I don't have to seek deputyship because DD1 knows she can't manage her own money. If there was a dispute, then we'd have to seek deputyship for her.

@Lougle Yes, this does sound like a complex case. The donor wasn’t considered mentally capable of purchasing a house nor managing her own money, but is capable of looking after herself in other respects.

It’s still worth the OP getting advice from the OPG though. If the loan is considered OK, nothing changes.

We don't know that, either. The donor could have decided that although she could manage the house buying process, it was too mentally straining to do it herself and she'd rather someone else did it. I do a lot of financial stuff for my parents because my DF is my DM's full time carer and he just doesn't have the patience for making phone calls to call centres, etc., so I do it to lighten the load.

I'm not saying that the OP shouldn't be concerned. I'm just saying that it doesn't automatically follow that because the sister has POA she has acted as an attorney, against her sister's best interests.

@Lougle. I had assumed that based on the OP’s first post about the donor sustaining a serious head injury. But yes, it may be that the donor felt that it was too much strain to manage her money, rather than actually lacking capacity.

@BruFord and you may be right. It depends on what 'mentally capable' really means. Lots of people don't feel capable without actually lacking capacity.

My father has full capacity. My mother does not.
I have held an LPA for several years which was recently registered with all of their financial institutions
My DF (does Times crossword every day and still beats me at Scrabble and Chess) has just lent me a substantial amount of money (but only about 25% of what I will probably inherit). It was all documented including a repayment schedule and signed by us and a witness. I also notified all other beneficiaries of the will and informed them how much I had borrowed and on what terms and how I would repay if they die before the repayment was due. I am also paying interest as the same rate as their maximum rate on their accounts. Transparency is important I think.

Did you mean to change name? If you didn't you can ask MNHQ to fix it by reporting your post.

What isn't clear is whether she is acting as an Attorney in this matter? Has the donor got capacity for finances or not (that's not the same as whether they need help with some aspect of financial decisions). If she has capacity, then it doesn't matter who is POA in the sense that she can loan someone money if she wants to. If she doesn't have capacity, then the Attorney can't borrow money under any circumstances because they always have to be acting in the donor's best interests, not their own.

Regardless of this situation, if the donor ticked 'jointly and severally', then the sister can act on her own. If 'jointly' she can't act without the other Attorney. Either way, she can't act as an Attorney and borrow money from the donor.

@Emsy999 Ive just looked at my Dad’s LPA and it depends which box is ticked on the form. If the individual chose “Jointly and Severally,” the Attorneys can make decisions alone or together. There are other options, but if that that box is ticked, I believe that the sister can make decisions without consulting the brother- please confirm this with the OPG, however.

Regardless of which box is ticked, the top of the page states that: “Whatever you choose, they must always act in your best interests.”

So if the OPG doesn’t consider this loan to be in her interests, there could be an issue.

Oops! My partner and I share a computer and she was still logged in and I didn't realise when I replied 🙈
Thanks for the heads up!

My BIL and his wife have helped themselves to over £100k of FIL’s money stating that they provide (minimal, think putting a pizza in the oven for his dinner) care for him. FIL has dementia but is physically capable and only requires help preparing hot food. They have lived in his house for 7 years rent free, haven’t paid a penny towards any bill, use his bank card for absolutely everything including purchasing petrol for work which he claims back as an expense into his own bank account! The wife (who clearly married BIL for a visa and access to money) uses the bank card for her own shopping! It’s theft. They think they’ve done nothing wrong. It’s been reported to the OPG and now we’re just hoping he gets POA removed. Both of them belong in prison. I’ll update when we have a result.

What donor you mean by ‘donor’? Why are you referring to the person as a donor?

It sounds like this person has had their money stolen.

Any monies spent by an Attorney have to be for the benefit of the donor. If the donor has capacity, they could have agreed to such a loan, but I would expect there to be a loan agreement in place. This would, I believe, fall outside the scope of a PoA.

If the donor does not have capacity, the only scenario I could see where that could be semi acceptable, would be to provide secure housing for the donor. I would expect there to be a proper loan agreement in place though and for the loan to be interest bearing at a beneficial rate to the donor.

In reality, if the goal is to provide secure housing, the money should actually be used to buy property in the donor's name.

Capacity can be a grey area, but from what you have said, it does not sound like the donor has capacity. When was the PoA put in place? If it was post accident, did the donor have capacity to consent to the PoA? If not, it should be a Guardianship, which is much more onerous and the Guardian should be reporting to the OPG on a regular basis.

You can contact OPG if you suspect foul play. The Attorney / Guardian should be keeping records of expenditure. I have Attorneyship for a family member. I keep annual spreadsheets showing income / expenditure which is categorised. I handle day to day stuff, any larger items of expenditure, I discuss with the other Attorney who lives abroad. It is a huge responsibility and not something to be undertaken lightly.

It's just the terminology when referring to power of attorney www.citizensadvice.org.uk/family/looking-after-people/managing-affairs-for-someone-else/#:~:text=The%20person%20making%20the%20power,banks%20or%20the%20local%20council.

This is awful. Your poor FIL. I hope the OPG investigate this fully. Please let me know what happens and I'm sending my best wishes.

I know that the donor wasn't keen on lending the attorney the money two years ago but has since "agreed" to it. I thought that the attorney had actually purchased a house but I was actually wrong. She's been lent over £250k which has been sitting in the attorneys bank account since January this year. She is going through a divorce and wants the divorce to be finalized before purchasing the property because she doesn't want her ex husband benefiting from it in anyway.

She's also stating now that she's no longer POA. So somewhere along the line she's stopped being POA and has borrowed this money from the donor... surely this makes the situation even more dodgy?

OP I can understand why you are concerned about this. But honestly you do not have reliable enough information for anyone to comment usefully. The story has changed several times by your own admission because you are hearing it second or third hand, so you don't have access to all the information.

You either have to accept you don't know all the ins and outs and leave it, or contact the OPG and ask them to investigate.