Dementia Action Week – Capacity and Private Wealth
By Nicola Bushby, Partner, and Katherine Reed, Solicitor in our Will, Trust & Estate Disputes team at Irwin Mitchell
Dementia Action Week provides us all with an opportunity to reflect upon our own lives, our families and the decisions we make in relation to our personal affairs.
According to NHS statistics, one in 14 people over the age of 65 have dementia, and the condition affects 1 in 6 people over 80. The Alzheimer’s Society says there are around 850,000 people living with dementia in the UK, projected to rise to 1.6 million by 2040.
Nicola Bushby, a partner in our Will, Trust and Estate Disputes team in London, says “if you develop dementia and you lose capacity to make decisions about your finances which, very sadly, can be the reality of the situation. It leaves a significant vacuum around the management of your property and affairs, making you exceptionally vulnerable to exploitation. The only way of mitigating this risk is to think and plan ahead. You need to appoint someone you trust with your life. And if they don’t exist, a professional you trust, or both.”
Concerns over capacity
If you have concerns about a family member’s capacity it’s important to seek a medical opinion as soon as possible. Asking their GP for their opinion is likely a good start. Katherine Reed, solicitor in our Will, Trust and Estate Disputes team in London, says, “a GP’s opinion is especially helpful were the GP has known the individual for many years and will therefore be well-placed to identify any changes in behaviour; however, a more robust approach would involve instructing a doctor who specialises in capacity issues, such as an old age psychiatrist.” Nicola says, “you should seek a medical assessment from a doctor with the appropriate experience for what you suspect is the problem. This is the best way to get the most accurate and reliable picture of things.”
Capacity is issue specific and, therefore, a person’s capacity needs to be assessed in respect of each decision. A person may have capacity in some domains but not others. Nicola says, “capacity affects every decision you need to make in life: where you live, who you have contact with, medical treatment, sex, marriage, making a Will, the management of your property and affairs, it goes on.”
In addition to this, capacity can fluctuate. Fluctuating capacity is particularly challenging. Nicola and Katherine observe, “when a person presents with fluctuating capacity, a professional opinion can be even more invaluable to help you identify and navigate what you can do for the person, their patterns and triggers and how to maximise their capacity. You may be able to wait for the person to regain capacity, but it depends on the nature and degree of the illness and fluctuation. They may need an attorney or deputy to make decisions on their behalf during episodes when they cannot make them themselves.”
Nicola and Katherine add, “whether a person is capacitous to manage their financial affairs or not can sadly become a contentious issue for families who cannot agree. In these circumstances, we would always encourage families to seek and follow medical advice, but if this doesn’t work, it’s possible to apply to the Court of Protection for an order that a person is assessed by a doctor if there is reason to believe they lack capacity in the relevant domain and it’s in their best interests for it to take place. There are a number of ways this can be achieved.”
Lasting Powers of Attorney and who to choose
Whilst an individual retains capacity they’re able to execute a Lasting Power of Attorney (LPA) which allows them to appoint one or more people to make decisions on their behalf. There are two types of LPA: health and welfare, and property and financial affairs. Welfare LPAs can only be used once the donor has lost capacity to make decisions for themselves. Property & Affairs LPAs are different, they can be used as soon as they have been registered while the person has capacity so long as there is no clause within the instrument which provides that they must only be used on a loss of capacity.
Nicola says, “in an ideal scenario, a person should appoint a professional to manage their finances under a Lasting Power of Attorney as it avoids mixing money and family; which can often drive a wedge between families, especially if you’ve chosen to appoint one child to act over another. However, if you want members of your family to act, which is also totally understandable, be alive to these issues, and discuss them frankly with your loved ones at the outset; otherwise, you’re likely to be storing up problems for further down the line when you may not have the capacity to straighten things out. Another option is to appoint a professional and one or more family members jointly.”
Katherine says, “if you’re appointed an attorney you will be in a fiduciary position. It’s important to understand what your responsibilities are; otherwise you could find yourself liable for any loss you might cause to the person’s estate, even if it was an innocent mistake. You should speak to a solicitor and get advice at the outset. Before executing an LPA, the person also needs to be aware of the risks and benefits of conferring powers to another to act for them. This is particularly the case if the individual has a complex portfolio of assets or significant wealth. Again, in these circumstances a professional may be best placed to act.”
Deputyships
If a person has already lost capacity to execute a LPA and to manage their property and affairs, an application will need to be made to the Court of Protection for the appointment of a deputy. This should be done with the benefit of legal advice.
Keeping accounts
Unfortunately, disputes relating to the management of a person’s affairs by attorneys and deputies are extremely common. Katherine says, “it’s important to put safeguards in place both for yourself as attorney and for the person whose assets and/or property you’re safeguarding. This means keeping a thorough account of your management of the person’s finances, detailing their capital and income and how it has been applied, which you can produce anytime you’re asked for it. It’ important not to do anything which places you in conflict with your fiduciary duties to act in good faith and not to profit out of the donor’s trust.”
Gifts
Nicola and Katherine observe, “any lifetime gifts should be made freely and while fully-informed of any benefits and/or disadvantages. If you’re acting as a legal advisor, you should ensure that the person has the requisite capacity to make the gift. It’s important to have contemporaneous evidence as to capacity to prevent the gift being reversed at a later date. If you’re an attorney or deputy seeking to make a gift, unless it’s below a particular threshold, you’ll need to seek the authority of the Court of Protection to make it.”
Wills
Disputes over Wills for lack of testamentary capacity or undue influence are becoming increasingly common. When considering the statistics it is clear that these disputes are only likely to increase. It’s important to ensure, if possible, that your Will is prepared by a reputable solicitor to mitigate the risks of it being found invalid at a later date. Contemporaneous capacity evidence is extremely important. An assessment by an independent doctor with appropriate experience at the material time when you provide instructions and execute the Will shall hold significant weight in any future dispute.
Independence
As a professional, when dealing with a vulnerable client, you should always make sure that any instructions are coming from the individual themselves, take detailed attendance notes and ensure the consultation happens without input from third parties. Meet your client face-to-face wherever possible as your assessment will likely be far more reliable when you can see your client and take in their normal environment.
Nicola suggests, “The problem with remote meetings for vulnerable clients is they can be easily manipulated. If you can meet your client face-to-face in a safe way, you should do so. The Law Society provides helpful guidance on how to meet the needs of vulnerable clients.”
Summary
Nicola and Katherine summarise “the best way of protecting yourself is to future-proof your situation and to have honest and transparent discussions with your family now.”
“If matters have already become contentious and you don’t know what to do, take legal advice and intervene early. You want to avoid a position where you’re trying to reverse what has already been done, as this may require court action and will be expensive.”
Nicola Bushby, a partner in our Will, Trust and Estate Disputes team in London, specialises in complex Court of Protection disputes, across both property and welfare issues, and Chancery trust and estate disputes.
Katherine Reed, a solicitor in our Will, Trust and Estate Disputes team in London has a mixed Chancery and Court of Protection practice.
If you have concerns about your family or friends or require further information about the issues covered in this article, please do get in touch.
