All Private Client solicitors will know that, within Scotland, there is a compulsory requirement to effect a Bond of Caution when setting up a Guardianship or settling an estate where no will is in existence.
The market for such bonds is small – mainly due to the fact that the overall premium pot is relatively low and the risk, on this basis, is unattractive to underwriters.
Equally, the number of claims per annum is low but the potential size of claim is high, e.g. bond sizes of up to £10m, are not uncommon and the incidence of financial abuse is rising. Latest statistics show that 42% of financial abuse cases are perpetrated by family members and 20% by “trusted” carers.
Indeed, while the COVID-19 pandemic has resulted in some households adding to their savings, this is not the case for many others – in times of recession, insurance claims rise in many business classes, e.g. theft and, of course, the type of financial abuse associated with Guardianship and Executry Bonds of Caution.
The Office of The Public Guardian in Falkirk is responsible for the management and monitoring of Guardianships in Scotland and adopts an understanding attitude to those Guardians who, for example, find themselves under the constant stress of looking after an elderly relative 24/7 but the OPG is a strong supporter of the back-up provided by Bonds of Caution.
Executries also come under the supervision of the OPG. Again, the number of claims is low but Bonds of Caution will respond not just to wrongful acts of the Executors but errors and omissions made by solicitors, e.g. releasing funds contrary to the correct guidelines.
Bonds are not insurance policies and are not subject to Insurance Premium Tax but the Cautioner must respond to a claim – often made by the Accountant of Court or the Sherriff Court – but will seek recovery from the Guardian, Executor or solicitor.
One area that is contentious is that of Powers of Attorney. The number of Powers of Attorney has increased significantly in recent years. BBC4’s “You and Yours” featured a programme on this subject in 2019 with tales of abuse by Attorneys.
While the Public Guardian in England & Wales responded by saying that his office was on top of this matter, it is rather like the Captain of the Titanic saying that it is only a small iceberg. Like all icebergs, we have no idea just how large the problem is and, often, the extent of the abuse is only revealed on the death of the Granter.
The Scottish Government set up a project to examine the need for and the availability of a compulsory Bond of Caution. Savendale/CLS responded with a single premium of £50 for new Powers of Attorney only, not existing ones.
However, the project’s conclusion, in my opinion, went full circle in that, while it is true that one would only appoint Attorneys whom one trusts, it still does not face up to the fact that 42% of financial abuse cases are perpetrated by family members.
Of course, any Bond offering would not only address fraud but mismanagement too but, without compulsion, it is very difficult to persuade a Granter to effect any cover – especially when the use of the powers may never happen.
But the problem will only get worse.
Finally, just a mention on other products such as Missing Wills, Missing Beneficiaries and Lost Share certificates – the latter being especially relevant during the pandemic when access to the properties of the deceased has been curtailed.
However, the insurance market can also respond to bespoke problems such as Unborn Beneficiaries cover in the event of a Variation of Trust – it does no harm to ask if there is a bond solution to unusual problems.
Please see www.savendale.co.uk Our plans are to introduce other products for Private Client solicitors including Life Assurance for older clients to meet possible IHT liabilities when making lifetime gifts.
Ian Burrell is Managing Director at Savendale offering Executry and Guardianship Bonds. Ian can be contacted at 0131 473 1048 / 07711 867950 or www.savendale.co.uk.