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It is common knowledge that when a person lacks mental capacity to make decisions about their finances, somebody else needs to step in to act on their behalf. This can be an attorney if the person has made a Lasting Power of Attorney (LPA) for financial decisions or an older style Enduring Power of Attorney (EPA), or Court of Protection appointed Deputy. However, the story doesn’t end there.
This article highlights the key duties of an attorney, what powers they do and do not have, and when to seek advice in relation to managing the affairs of a person that lacks capacity (described here as ‘P’).
Five key principles
The Mental Capacity Act 2005 (MCA 2005), supported by its associated “Code of Practice” provides a decision-making framework for attorneys and deputies. The MCA 2005 is founded on 5 key principles as follows:
- A decision should only be made on behalf of P if they are unable to make this decision for themselves.
Mental capacity to make a decision can fluctuate depending on the time of day or how a person is feeling. It also depends on the question that is being asked. A person can easily have capacity to do some things (ie make a gift of £10 to a grandchild at Christmas) but not others (ie make a decision to sell a piece of land).
- All practicable steps should be taken to help and support P make the decision for themselves before the attorney steps in to make it for them.
This can include simple things such as making sure that P feels comfortable and they have had a good sleep, to more complex things such as ensuring they don’t feel under emotional pressure.
- A person is not to be treated as unable to make a decision merely because he makes an unwise decision.
- Any decision made on behalf of P must be done in their best interests.
This means that when making any decision on behalf of P, the attorney must ensure that they consider P’s current wishes and feelings and any previously expressed wishes and feelings. In addition the views of carers, including close relatives and friends, the attorney’s view should be taken into account. It can often be helpful to write all of these conflicting views down, and carry out a ‘balance sheet’ comparison, and reach a conclusion in that way. It is very sensible to keep a written record of any significant decisions that are made and the reasoning behind the decision.
- Any decision made on behalf of P must be done in a way that is as least restrictive as possible to P in respect of their rights and freedoms.
Any decision an attorney or deputy makes must be compliant with these key principles. In addition to this, below we outline the key duties and prohibitions on an attorney in performing their role, and explore some grey areas.
‘Must do’
- Duty to keep funds separate
P’s funds should be kept entirely separate from anybody else’s, including the attorney’s, unless there was previously a joint account in place, and it is in P’s best interests to keep it in place.
- Duty to manage finances and assets
An attorney should thoroughly review P’s finances, seeking advice from a suitably qualified independent financial advisor, when sensible Such management will include ensuring relevant insurances are in place and properties are maintained. It will also include seeking and securing appropriate care and benefit funding, such as Attendance Allowance and Local Authority funding, where appropriate.
- Duty to avoid conflict of interest
An attorney should avoid placing themselves in a position where their interests and preferred outcomes conflict with P’s. This can be very difficult where there is a multigenerational business to manage, as there can be conflicting calls on resources, and opposing desired outcomes. It is often sensible to seek professional specialist advice in such situations, and a Court of Protection application may be required.
- Duty to keep accounts and records
It is crucial that attorneys keep clear, written records of all of P’s finances and major decisions made. This can partly be in the form of bank statements. They should also keep records of any expenses incurred on behalf of P, and copies of all receipts. They can be requested by the OPG.
‘Can’t do’
- Create a new will for P
An attorney cannot create a new will for P. If P lacks capacity to make a new will, then a new will can only be authorised by the Court of Protection. It is sensible to seek professional advice.
- Receive payment for role
A non-professional attorney cannot be paid for performing their role. They can only receive out of pocket expenses.
- Make decisions about health or welfare
A financial attorney or deputy is only authorised to make financial decisions. They cannot decide what care P should receive, or where they should live.
Grey areas
- Acting as a trustee, director or partner for P
Where P is a trustee of a family trust or a director or partner in a business, or where acting on behalf of P in a sale of jointly owned property, the law can be complex. Much depends on the exact circumstances in hand. There will often be issues of conflict of interests in such situations. Specific, specialist advice should be sought before acting.
- Make gifts
Attorneys are subject to very tight restrictions on what gifts can be made of P’s money. As a general rule, only small gifts on customary occasions such as birthdays or Christmas can be given without specific additional authority. However, there are some exemptions to this, and specific advice should be sought before any gifts are made over and above the basic allowance above, including where the purpose is to save tax in the long term.
- Increase risk of investment portfolio
The Court of Protection has expressed concerns over any significant increase in the risk levels of any investments that P holds, by their attorney. This also includes concern over investing in AIM portfolios. Specific specialist advice should be sought before considering this.
The Office of the Public Guardian, which monitor attorneys and deputies, has produced a helpful guide to acting as an attorney. For more complex questions please contact Holly Mieville-Hawkins, Head of Michelmores Mental Capacity Group.
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