Many families find discussing financial management to be a challenging conversation. However, it is important that the legal options available for financial decision-making are more widely discussed and understood – particularly should a person lose capacity in the future to manage their finances independently.
Both Lasting Power of Attorney (LPA) and Deputyships are legal tools which provide authority to a specific person(s) to make financial decisions on someone’s behalf, either before they lose capacity (in the case of an LPA) or when that individual has lost mental capacity (either an LPA or a Deputyship).
An LPA is ‘Plan A’ for many individuals who want to future-proof their decision-making. This is created when an individual has capacity to choose in advance who to appoint to manage their finances should the need arise. The key factor of an LPA is that it must be made ahead of its necessity. This is because the individual making the LPA must have understanding to consent to the nominated person(s) taking responsibility for their financial interests should it become necessary. A person could create an LPA and have it be effective whilst still having capacity or it could come into effect once capacity is lost. However, once an individual has lost mental capacity, they cannot make an LPA in retrospect.
Therefore, a commonly arising issue occurs when someone has not made an LPA and subsequently loses capacity. In this situation, a Deputyship is ‘Plan B’. A Deputy is appointed by the Court of Protection to manage the property and finances of the person who has lost capacity. The financial Deputy may be either a professional, such as a Court of Protection Solicitor, or a lay person who makes an application to the Court. In either scenario, whomever acts as Deputy would not be the decision of the person subject to the Deputyship Order, due to the individual lacking mental capacity. It would then be the role of the Court and the appointed Deputy to act in the best financial interests of the individual in line with the Mental Capacity Act 2005. It is important to note that just because a person lacks capacity surrounding finances does not mean that they would lack capacity in other aspects of their lives. Furthermore, assessment of a client’s capacity is ‘time and decision specific’ which means that a person could only have capacity or lack capacity to make a specific decision at a specific time.
To summarise, the critical difference between an LPA and a Deputyship, is that a person who is subject to a Deputyship does not consent to the management of their finances by someone else, as they lack mental capacity to do so. Whereas, with an LPA, the individual chooses who they would like to manage their finances, and at which point this comes into effect: i.e. either whilst they have capacity and want assistance with their finances or to manage their financial affairs following loss of financial capacity.
For further information regarding financial Deputyships or to make an application to be appointed as a Lay Deputy for someone who has lost capacity, please email the Court of Protection Team at cophalifax@ramsdens.co.uk or call us on 0344 326 0049.
The above article is for illustrative purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any part of the information given.