Recovering Assets from a Former Attorney after the Donor’s Death

A Lasting Power of Attorney (LPA) is a legal document that, once effective, grants an individual (the “attorney”) the continuing authority to manage the affairs of another person (the “donor”), even after the donor loses capacity. This is different to ordinary powers of attorney that automatically end when the donor loses capacity.

The role of an attorney carries significant trust and responsibility.  As such, attorneys are under strict duties which include the duty to act in the donor’s best interests, exercise due care and diligence, and avoid conflicts of interest or opportunities for personal gain (collectively known as “fiduciary duties”).  When managing the donor’s financial affairs, the attorney must keep the donor’s finances separate from their own and maintain accurate financial records.

Unfortunately, some attorneys may abuse their position by misappropriating the donor’s assets, transferring funds to themselves, and/or otherwise misusing the donor’s money.  Often, such misbehaviour only comes to light after the donor’s death.

What happens after the donor’s death?

An LPA automatically ends upon the donor’s death and the donor’s assets automatically pass to the person responsible for administering their estate (the “personal representative”).  If the personal representative suspects that assets have been misappropriated by the former attorney, they have the right to bring claims against the former attorney to recover misappropriated assets on behalf of the donor’s estate.

Legal remedies available

If a personal representative suspects a former attorney of misappropriating assets, they should begin by collating relevant evidence such as financial records and bank statements.  They should then speak with a solicitor who will advise on the best course of action.  Some options for the recovery of misappropriated assets may be as follows:

1. Claims for breach of fiduciary duty or conversion

As outlined above, attorneys owe fiduciary duties to the donor.  As such, a claim for damages for breach of those duties may be brought after the donor’s death by the donor’s personal representative.

In certain cases, it may also be possible to “trace” misappropriated money through the hands of an attorney into assets acquired by them.  In such cases, the court may make an order declaring that such assets are held on trust for the donor’s estate.  The burden of proof in such claims is helpful for the personal representative.  Indeed, attorneys are under a strict duty to account for all transactions made on behalf of the donor and are expected to keep detailed records.  If the attorney cannot justify or explain a payment as being in the donor’s interest, the sum will usually need to be restored to the donor’s estate.

The obligation to account for expenditure continues even after the donor’s death.  Therefore, where there is any uncertainty as to payments made by the former attorney, the personal representative could bring a claim for an account in order to work out what (if any) sums were misappropriated (and thus capable of being claimed as damages).

Additionally, if an attorney has taken control of the donor’s assets without proper authority, they may be liable for conversion – i.e the wrongful possession or control of the donor’s assets.  The personal representative may pursue a civil claim to recover the asset or its monetary equivalent.

2. Fraud claims

If the attorney engaged in fraudulent conduct to misappropriate the donor’s assets, they could be liable for fraud.  If fraud is established, the personal representative could seek to recover the misappropriated assets, as well as any consequential losses resulting from the fraudulent conduct.  However, such claims often do not add much to the earlier mentioned remedies, and are generally much harder to prove.

3. Freezing Injunctions

If there is a risk of the attorney dissipating the misappropriated assets, the personal representative may be able to apply for a freezing injunction.  If obtained, a freezing injunction freezes the assets of the attorney to a certain amount (either in England & Wales or sometimes worldwide).  The purpose of this is to preserve the assets pending recovery through one of the claims mentioned above.

4. Criminal Prosecution

If the misappropriation involves theft or fraud, the personal representative may also report the matter to the police.  Where a successful criminal conviction is brought against the attorney, it may also be possible for the CPS to apply for a Confiscation Order under the Proceeds of Crime Act 2002 to recover the misappropriated assets.  This is, however, very rare in this context, and such claims are much more complicated and harder to succeed upon than a civil claim due (in part) to the higher standard of proof in criminal courts.

Upcoming Event: Attorneyship decisions and gifts – what can be done after death?

To learn more about powers of attorney or deputyship, register for our upcoming event on 12 June, where our Court of Protection specialist Holly Miéville-Hawkins and contentious probate expert David Wedgwood will explore what happens when such decisions are challenged after the donor’s death.