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Capacity in relation to finances – what is it?

Mental capacity regarding financial affairs relates to the ability to make a decision that may have a financial consequence. This could include, for example, buying or selling property, seeking a divorce, obtaining a loan, entering into a contract, or entering into legal proceedings.

Capacity is decision-specific so, whilst someone may have the capacity to make day-to-day decisions (such as making a small monthly payment to a charity that they have supported for the last 20 years), they may not have capacity to make a decision that has a significant consequence or carries a higher risk (such as selling a property or investing a sum of money).

There are many reasons why someone may be deemed to have lost capacity, including (but not limited to) mental health disorders, learning disabilities, dementia, and brain injuries.

A person who lacks mental capacity is not able to do one or more of the following:

  • Understand the information that has been given to them to make a decision;
  • Retain that information;
  • Weigh up the information available to make the decision; and
  • Communicate their decision.
THE MENTAL CAPACITY ACT 2005 (“MCA”)

The MCA is designed to empower and protect those who may have lost capacity and are not able to make decisions for themselves. There are five main points in the MCA:

  1. A person must be assumed to have the capacity to make a decision unless it is proved otherwise;
  2. Wherever possible, a person must be helped to make their own decision;
  3. A person must not be treated as lacking the capacity to make a decision just because they make an unwise decision;
  4. If a decision is made for someone who lacks capacity, the decision must be in their best interests; and
  5. If a person lacks capacity, the care and treatment provided to them must be the least restrictive of their basic rights and freedoms.
SUSPECTING INCAPACITY – WHAT NEXT?

So what do you do when you suspect someone may be losing or have lost capacity?

The first step is practical. Keep a log of behaviour that you think suggests they do not have capacity. Depending on how often you interact with the person, this might reveal some patterns or particular triggers.

The behaviour log will also help with any conversations you have with the GP, which is the next step if that person is willing to book a GP appointment to talk about what has been happening.  In terms of progressing with a Lasting Power of Attorney, the best approach is to obtain a ‘capacity assessment report’ to ascertain the current status of the person’s mental capacity.  This will help you work out how best to support them.

Some GPs will offer this.  It would be sensible to mention it at the appointment, in case the GP can give an initial indication and arrange a full assessment. If the GP is unable to assist with a mental capacity report, some social workers or local authorities will be able to complete one, as well as private independent medical professionals.

Following the assessment, you will have more information about the person’s capacity and, if they are deemed to have capacity, then they can choose to set up Lasting Powers of Attorney to ensure that someone is appointed to make decisions for them should they lose capacity in the future.

If the person is deemed not to have capacity, then you will need to consider applying to the Court of Protection for a Deputy to be appointed to manage their finances. Whether you are considering a Lasting Power of Attorney, or think it may be necessary for a Deputy to be appointed for a person who has lost capacity, our dedicated team would be happy to guide you through the process.

If you would like more information about how to organise a private independent assessment, putting Lasting Powers of Attorney in place or anything else related to capacity, then please contact Pamela Jarvis in the Wealth Planning Team on 020 7288 4771 or email her at PamelaJarvis@BoltBurdon.co.uk.

Pamela Jarvis

020 7288 4771
07881 312 497
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