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.
The necessity for, and nature of, any such checks should ideally be agreed with the donor and their proposed attorneys early on, while the donor retains capacity.
The donor may have included preferences, or legally binding instructions, in the LPA, and these should be carefully considered by the attorneys and their advisers as they may affect the options available, such as imposing financial limits on transactions or requesting ethical investments.
Such checks will help ensure the adviser is acting on the instructions of the correct person and in line with the donor’s wishes. In some cases this could help prevent fraudulent activity by attorneys and will also safeguard against acting on the instructions of a client who might have lost capacity, either temporarily or permanently.
What if there is no LPA or EPA?
An LPA or EPA is usually the best way of ensuring an individual’s best interests are met if they lose capacity. It is also the quickest and most efficient way of transferring management of their financial affairs, which can be particularly important if their finances are intertwined with those of other family members, their business, or if they have urgent commitments.
