Managing other people's money

Millions of pounds are handled by people on behalf of those who are incapable of handling their own assets.

Pensions and benefits are collected, obligations are incurred, nursing home fees are paid, on behalf of the old, the sick and the disabled.

No doubt most of the money is properly spent but possibly not all is strictly accounted for.What can lawfully be done to take over the management of another's affairs and what can be done to plan ahead for one's own possible disablement?The newly-published second edition of Age Concern's publication Managing Other People's Money by Penny Letts (Penny Letts.

Age Concern, Age Concern England, 1268 London Road, London SW16 4ER.

Second edition, 1998, £9.99) offers excellent guidance.

It covers the law in England and Wales only.WHEN TO TAKE OVERThe book opens with a warning.

"It is important to seek expert advice in all cases" as the management of financial affairs can be extremely complicated.

It could have added that family disputes can be bitter even if the greatest care has been taken over the keeping of full records of income and expenditure.

A series of imaginary case histories is given by way of illustration, divided into those where help is requested and those where it is not requested.In the first group are the following:Freda Mason cannot get about for a few days as she has sprained her ankle, so she nominates her neighbour to collect her pension from the Post Office, by signing the authority on the back of the allowance order slip, and the agent signs the receipt.Freda can sign authorities week by week as she wishes, so there is no danger of her being unable to draw personally when she recovers.Marjorie Evans fell in her own home and fractured her femur.

She signs a bank mandate for her daughter to operate her bank account and appoints her as agent to collect her pension.

She later feels unable to return to her own home so after assessment of her needs by social services she goes into a private nursing home and her daughter continues to act.

They decide against having the manager of the home collect her pension as they wish to have control over all her money.

They later decide to sell the house and she makes a power of attorney for her daughter to sign the deed of transfer in due course.

She is advised about an enduring power of attorney but says she is "bad in my legs, not in my head" and postpones making one.Rajesh Patel has severe arthritis and lives alone.

He has managed with the help of his family, neighbours and "home help".

His son has a growing family and suggests that they should all live together in a larger home, Rajesh helping to buy it by selling his house.

Rajesh needs independent legal advice, with provision made for the arrangement to break down and for Rajesh to need his money again.Edward Ford, a widower, has a substantial minority shareholding in the family business and other assets.

His sons now run the business and he also wants to provide for them and his daughters.

He needs to appoint some of them his attorneys under an enduring power of attorney (EPA) and to explain to all the family his wishes should he become incapacitated.In the second group are those situations where help is needed but is not requested.

In some cases people may have the ability to make their own decisions but be unable to communicate in any sophisticated way, as where they have lost speech through a severe stroke.

Others may be mentally incapable of comprehension, such as through dementia or mental illness.

The book points out that ability must be assumed until the contrary is demonstrated and that the family doctor should be consulted in any case of doubt.For example, Margaret Wilson is schizophrenic and is stable when she takes her medication regularly.

She sometimes omits to take it as she does not like the side effects and becomes ill again.

In this state she spends rashly and builds up debts.

Her benefits could be paid to an appointee after both she and the proposed appointee have been visited by the Benefits Agency and a full picture obtained by them.

The appointee would then see to proper payment, though it would still be hard to prevent some debt.

Some of her regular bills could be put on direct debit.The appointee solution could be used for Mary Barker who collects her own pension but hides it so carefully that she forgets where it is and reports "burglaries" to the police.

Her son could be the appointee.William Ferguson no w has Alzheimer's disease.

He has never told his wife Janet about the family's financial affairs and now it is too late.

He refuses to discuss the matter, even though much of the money is in his name alone.

He refuses to make an EPA.

His wife may need to apply to the Court of Protection for the appointment of a receiver.

The court has a wide discretion in the choice of receiver.

Mrs Ferguson may feel herself unfitted for the task and prefer a relative, family friend or professional adviser to perform it.

In the final resort the Public Trustee could assist but the fees can be considerable and the assets may not justify it.

Medical evidence will be required in all cases.In the unusual case of there being immediate need for provision to be made for support of a person or dependants (such as where the person has a road accident and is rendered permanently severely brain damaged) an emergency application can be made to the Court of Protection.

It needs to be shown that the person is incapable of managing his or her affairs and that urgent action is necessary to safeguard money or property.THE POWERS AVAILABLEInformal arrangementsWhere access is needed for another person to a bank or building society account a third party mandate may be completed.

Each institution will have different requirements.

Usually a letter or official form of authority signed by the account holder is required, giving the recipient power to sign cheques and withdrawal forms for the holder, either alone or jointly with the holder or some other person.

The mandate is revoked if the account holder becomes mentally incapable of managing the account, hence the value of making an EPA also.Money can be put into joint names so that the able person can handle theaccount, with an "either to sign" designation.

If the original owner ceases to trust the other joint owner he can seek to terminate the joint arrangement but if the other has put some of his or her money into the account there may be a dispute about their shares.

If the bank is informed of a dispute between the joint holders, it will freeze the account until there is agreement.

Husband and wife are presumed to own equal shares, irrespective of contribution.

Holders of a joint account are jointly and severally liable for any debt if the account goes overdrawn.

If the mandate for the joint account applies to it only when it is in credit, the one who signed the cheque which sends it into overdraft will be liable alone.

If the bank is made aware that one account holder has become mentally incapacitated, it will freeze the account until other arrangements are made.Collecting social security benefits through an agent has been touched on.

In addition, if the agent is likely to be used for a long period, the claimant can ask the Benefits Agency to issue to the agent an agency card and the claimant need then only sign on the front of the payment order.

Any change in circumstances, such as receipt of a legacy, which may affect entitlement to benefit, must be reported to the BA by the claimant.

The agent should remind the claimant of this need.

If the claimant becomes unable to understand, the BA may, if satisfied, make the agent an appointee.

The book does not recommend that managers or proprietors of residential homes should be made appointees and if they are, social services should be informed.

Detailed and careful individual records should be kept at the home, monies should not go into a common pool.

Claimants in local authority homes can also use "alternative agency" and nominate an official of the local autho rity (by office, not by name) to collect their benefits as their "signing agent".

The official signs the payment order and not the claimant.The claimant who uses an agent is vulnerable.

He or she may be ill or frail and may hesitate to charge the agent with wrong doing.

Often no-one else will be in a position to monitor the agent's expenditure of the benefit.

An agent who loses or misappropriates money is liable personally for the loss and its theft is a criminal offence.FORMAL ARRANGEMENTSThe book deals with powers of attorney, trustee powers of attorney and enduring powers of attorney.

It also covers collecting pensions and salaries as appointee, claiming tax refunds, dealing with savings and investments and with surrendering or renegotiating life assurance policies.Living arrangements form a separate chapter.

Where a person wishes and is able to stay put, it may be necessary to make sure that the rent or mortgage is promptly paid, that repairs and insurance are attended to, possibly that "interest-only" mortgage payments are made in a period of financial difficulty, and that personal support through social services is obtained (home help, meals-on-wheels, aids and adaptations, provision of a phone and alarm call, attendance at day centres).

Where ability declines, the next steps may be shared accommodation, retirement housing or sheltered houses, or residential or nursing home.

Another chapter deals with dying and death and stresses the importance of making a will with professional advice.CHECKLISTSPossibly the most important section of the book is its words of sound advice laced with caution.

They are contained in the form of checklists, of which there are three:-- Procedures"Do what you think the person whose affairs you are looking after would have done if he or she had been able.

So far as possible, follow the wishes of the person.

Always consult with the person and take time to explain what you are doing, even if you don't think he or she can understand.

It will reassure them to know what is going on, even if they forget later.

When you are acting in a formal capacity, take care to follow the correct procedures.

Use money wisely but don't be mean.

There is no point storing up money that could be used for the benefit and comfort of the person you are acting for".-- Safeguards"Always keep careful records of what you are doing.

Record details of income and expenditure.

Keep regular up-to-date accounts.

Keep a person's money in a separate account in his or her name, so that it does not get mixed up with your own.

When dealing with savings, investments or property, make sure that you have the proper authority.

If you are in any doubt what you are doing, always seek advice."-- Complaints"If you think that someone is acting wrongly in managing the money or affairs of another person who is not capable of acting for themselves, report it to the relevant authorities." The book gives a list of authorities, who could be contacted as appropriate, such as the Benefits Agency, Public Trustee Office, the registration authority in the case of a residential or nursing home, Office for the Supervision of Solicitors.

In this connection the book seems lacking in its delineation of the possible effects of a complaint.

The writer would caution that the intending complainant should be very slow to make a complaint without having the fullest information.

The person whose money is being managed should, if in a fit state, sanction the complaint.

The alleged mismanager should be given a chance to consider it and to justify his or her conduct.

The complainer might find that he or she is shown to be an over-zealous busybody who has caused distress to vulnerable people and may even be proceeded against for defamation.A final section gives useful information about the sources of help, addresses of organisations which can assist and precedents for powers of attorney and EPAs.The foreword from the Master of the Court of Protection puts the position succinctly."Managing your own money is one thing.

Managing other people's money is another.

Within reason, you can do what you like with your own money -- When you are managing other people's money you should have some sort of authority to act.

You should act reasonably.

You should act in the other person's best interests.

And you should be able, if asked, to show how much you have received and how you have spent or invested it."The Master adds rightly that although the book is primarily intended to guide family members, it is also a useful addition to any professional adviser's library.