Incapacity: an issue of age?
8 March 2021
As part of International Women's Day we have some excellent articles from our experts aimed at helping women know their worth and take ownership of their own affairs when it comes to pensions, wills, powers of attorney and property. In this article, solicitor in our Mental Capacity team, Leah Ringwood-Hoare highlights that age is not an issue when it comes to deciding what should happen if you lose the capacity to make decisions over your financial affairs.
Whilst a lot of us have given some thought to what they might like to happen to their assets and when they die, how many of us have given any thought to what might happen if we lose the mental capacity to make decisions about our financial affairs? Many clients start to think about this when they retire, but despite what society might perpetuate, incapacity is not just reserved for those over 65 years old.
As a solicitor in Wilsons' Court of Protection team, over 90% of my clients are people under the age of 65 who have sustained traumatic brain injuries, usually following road traffic accidents. Whilst men are more likely than women to be admitted to hospital for a brain injury, since 2006 there has been an increase of 23% in the number of women being admitted for the same injuries. It is too easy to think that it will never happen to you or your family, and hopefully it won’t, but that shouldn't stop you planning for the worst (and hoping for the best!).
So what can you do to plan for incapacity?
A lasting power of attorney ("LPA") is a legal document that allows you to appoint a person(s) to make decisions on your behalf. These people are known as your attorneys. There are two types of LPA: one for your property and financial affairs and the other for your health and welfare. An LPA allows you to formally record your wishes in the event that you are no longer able to make decisions for yourself. This might include your wishes about where you would like to live, your views on life sustaining treatment or whether or not you would like to contribute to your children's university fees. Whilst I would encourage everyone to put both types of LPA in place, this article focuses solely on incapacity in relation to your property and financial affairs.
Making an LPA is a fairly straightforward process. You can approach a solicitor to advise you, or you may feel confident to draft the document yourself using the Office of the Public Guardian's website: Make a lasting power of attorney - GOV.UK. Once the document is drafted and signed by the necessary people it needs to be registered with the Office of the Public Guardian before it can be used. The registration fee is £82 per LPA.
If you don't make an LPA and you lose capacity to make decisions about and manage your financial affairs then there will be no one with authority to make decisions on your behalf. A common misconception is that your next of kin can make these decisions for you. However, 'next of kin' is not a term recognised by the law and they do not have any legal authority to make decisions about your financial affairs. The same goes for people who are married or in civil partnerships. If your spouse or civil partner loses capacity, you do not automatically have authority to make decisions on their behalf. The only way to give a person that authority is to make an LPA. So whatever your family circumstances or relationship status, it is important to think about your wishes and put in place LPAs.
In situations where a person has not made an LPA and they have lost capacity, it will be necessary for an application to be made to the Court of Protection for a person to be appointed by the court to act on your behalf. This person is known as a deputy. It might be a family member, friend, professional deputy or even your local authority, but the decision on who is appointed rests entirely with the Court of Protection. The fee for making an application to the Court of Protection is currently £365. If the applicant needs help from a solicitor to make the application then there will also be legal fees incurred, which, except in the most unusually of circumstances, are paid from the financial resources of the person who lacks capacity.
The court aims to make an order appointing a deputy within 10 to 12 weeks, but it usually takes 3 to 6 months for an order to be made and sometimes longer if the court requires further information or a court hearing. During that time there is unlikely to be anyone with authority to manage your financial affairs and make decisions on your behalf. Your bank is likely to freeze your accounts, bills could be left unpaid and, if you require any care that needs to be paid for, you could have difficulties procuring this.
For those with dependent children or elderly relatives who live with or rely on you financially then it is even more important to ensure that you undertake planning in case of losing capacity. Single parent families make up nearly a quarter of families with dependent children and of those 90% of single parents are women. If single parents were to lose capacity and no LPA is in place, then, from a financial perspective, their children are likely to be severely affected.
Planning for incapacity is not just limited to the making of LPAs and I would encourage people to review their financial affairs in general to plan for incapacity. If you are employed you may wish to review your employment contract to understand your position if you were to be taken ill during your employment. There may be little you can do to amend the terms of the contract, but understanding your position may influence other decisions you make.
If you are self-employed, you may wish to think about an income protection policy to ensure that in the event of you becoming ill and unable to work you will still receive an income. Similarly, if you have a mortgage, have you taken out a critical illness policy to ensure that your mortgage is paid and your home secure should you be taken ill and unable to pay it? Again, many people may have life insurance policies, but these only come into effect when you have died. What happens to you in the meantime and, more importantly for those with children or dependent elderly relatives, what happens to them?
Wilsons can assist clients with making an LPA so if you would like to put in place LPAs or you would like advice in relation to planning for incapacity or incapacity generally, whether in relation to yourself or a relative please do get in touch.
