Ask a Lawyer ‘My wife has dementia but her bank is blocking me’

QI act as attorney for my wife under a lasting power of attorney for property and finances. We set up the LPA when she was diagnosed with dementia and sadly her illness is now severe.

We own a house in our joint names as “tenants in common” and have unequal shares as she put more capital in than me and this is recorded in a “declaration of trust”. We are both in our second marriage and each have two children from earlier marriages.

We have “mirror” wills that say whoever dies first leaves his or her share in the house in trust for the survivor and then after the survivor’s death our own shares in the house go to our respective children.

My wife is now living in a care home. The NHS pays for her care.

I have a loan of £10,000 taken out to fund recent renovations to the house. I make the monthly repayments but given the impact that rampant inflation is having on savings generally I want to take the capital my wife has in her building society account and pay off the loan.

My wife will then get the “credit” as an increased share in the matrimonial home, so her children will eventually benefit that way.

However, when I explained to the building society staff what I wanted to do, they refused to allow it. They said that as an attorney I could not make gifts that benefit myself and they blocked the transaction.

Are they right to do this?

– Richard, by email

AI am sorry to hear about your wife’s illness but I compliment you both on getting your legal affairs in order before dementia fully took away your wife’s ability to make decisions for herself.

As you are both on your second marriage and do not have children together, there is an added imperative to have clear and transparent financial arrangements so that each side of the family feels there is fairness with regard to your finances and future arrangements – you have done that with the declaration of trust for your house, which sets out who is entitled to what capital once the house is eventually sold.

There are two types of lasting power of attorney – one for property and finances and the other for health and welfare decisions.

The Government would like as many of us as possible aged over 18 to have LPAs in place so that there is a mechanism for a person who ends up lacking mental capacity for whatever reason ( accident or illness) to be supported with making decisions.

It is a lofty ambition, which sometimes gets a bad press when attorneys behave inappropriately by putting themselves, and what is best for them, above what is best for the person who made the LPA.

The logic that flows from this is that the most important choice to exercise when you make an LPA is who to appoint as your attorney. Your wife clearly had faith in you to act for her and, as a couple, you have a history of recording via legal documents the financial arrangements between you.

The building society staff you have encountered are correct that an attorney should not use their role to benefit themselves, but I believe they are wrong to call it a gift and wrong to block it.

In limited circumstances, gifts by attorneys to themselves are lawful, for instance if there is history of such gifts that an attorney is simply continuing, the gifts are proportionate and in the “best interests” of the person for whom the attorney is acting.

However, what you are proposing is not a gift. It is more nuanced than that. You wish to use your role as attorney to swap one type of investment (cash) for another ( bricks and mortar).

You are not proposing that the cash be given to you. The risk to your wife if you keep the cash where it is is that inflation will erode its value. The risk to her if you invest more of her capital in the house is that if house prices fall, her capital will be devalued.

At the moment, where we have very high inflation and house prices are not ( yet) falling, it seems like a balanced decision to do what you want to do.

The building society staff are correct to mention that any decision you take as attorney should be in the best interests of the person you are making the decision for.

The key legislation here is section 4 of the Mental Capacity Act 2005, which says that one of the factors to consider is the “person’s past and present wishes and feelings” (your history of investing different amounts of capital in the house and giving credit for that is helpful) and “the other factors that she would be likely to consider if she were able to do so”.

Here the risk- benefit analysis of cash being eroded by inflation against being invested in a house is relevant. So too is the fact that your wife’s care is funded under NHS “continuing care”, so her need for access to “ready cash” is diminished.

As an aside, it is also a shrewd move to guard against the NHS funding being withdrawn: if you are still living in the house and your wife becomes “self-funding” for her care, the capital in the house will be disregarded and not included in your wife’s financial assessment.

I believe that what you propose is lawful and should be permitted. If the local building society staff continue to block it, I would urge you to refer it to head office, who – if you are lucky –will have a specialist power of attorney team who will hopefully agree with me. If they do not, make an official complaint and quote this article. Good luck.