ProtectionMar 29 2021

Why older clients should have a lasting power of attorney

  • Describe how Lasting Powers of Attorney work
  • Explain how they can be set up
  • Describe what 'lack of mental capacity' means
  • Describe how Lasting Powers of Attorney work
  • Explain how they can be set up
  • Describe what 'lack of mental capacity' means
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Approx.30min
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Why older clients should have a lasting power of attorney
Pexels/Matthias Zomer

According to the Mental Capacity Act 2005, a person must be assumed to have capacity unless it has been established that they do not, and they should not be treated as unable to make a decision unless all practicable steps have been taken to help them do so without success. 

Another important principle is that making unwise decisions should not be conflated with inability to make decisions. If the donor has a history of making reckless decisions then the fact they have made another investment that flies in the face of good sense is not, in and of itself, evidence of impaired mental capacity.

If a decision does have to be made on someone’s behalf because they lack capacity it should be the least-restrictive option which still achieves the purpose.

When assessing mental capacity under the Mental Capacity Act 2005, a two-stage test should be applied:

Stage 1: Does the Donor have an impairment or disturbance in the functioning of their mind or brain?

Stage 2: If an impairment or disturbance is present, does it prevent them from making the decision in question at the time it needs to be made?

The first stage is a diagnostic test. A disturbance or impairment could be temporary or permanent and could include a wide range of causes, such as: illness; brain damage; the symptoms of other medical conditions; or the consequences of drug or alcohol misuse. It must be present before the second stage becomes relevant.

Assessing the effect of the impairment or disturbance, the second stage of the test, can be difficult and requires the donor to be able to:

  • Understand and retain the relevant information
  • Use or weigh the information as part of the decision-making process
  • Communicate their decision.

While the ultimate responsibility for assessing capacity lies with the attorney, in cases of doubt – for example where the donor appears to have understanding but cannot retain the details of decisions they have made – it might be appropriate to seek a report from a suitably qualified capacity assessor or medical expert. There may be a cost associated with this.

It is also possible for attorneys to contact the Office of the Public Guardian for advice regarding their duties. When significant decisions are being made it is prudent for attorneys to keep a record of the assessment they have made.

Because loss of capacity is usually a process rather than a single event, it will sometimes be appropriate for financial advisers to carry out additional checks and due diligence before acting on instructions, particularly those with significant consequences.

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