In the UK around one person develops dementia every three minutes, writes Libby Holding, and so mental capacity is a growing area of interest among those operating in the will-writing and estate management market
The increasing importance of mental capacity is not only a result of the population living longer. It is also a combination of the numbers of people suffering from dementia and related conditions increasing, as well as a growing awareness of the issues that arise when people lose mental capacity without proper planning in place.
According to the Alzheimer's Society, it is now estimated that one person develops dementia every three minutes in the UK, so the concerns around mental capacity look likely to only increase.
And it is not only Alzheimer's - mental capacity could arise as a result of injury, illness, learning difficulties, mental health problems or substance misuse. It can be permanent, temporary or even sometimes fluctuating depending on the individual circumstances.
The Mental Capacity Act (MCA) 2005 sets out key principles for capacity and those most relevant when taking instructions are as follows:
- A person should be presumed to have capacity unless it can be proved otherwise
- A person should be supported to make their own decisions as far as possible and all reasonable practicable steps should be taken to assist them
- A person is not to be treated as unable to make a decision merely because they make an unwise decision
The MCA 2005 goes on to explain that a person is deemed to be unable to make their own decisions if they cannot do one or more of the following things:
- Understand information relevant to the decision;
- Retain that information;
- Use or weigh that information as part of the decision-making process; or
- Communicate their decision (by any means)
With that in mind, during the estate planning process every effort should be made to find ways of communicating with someone before deciding that they lack capacity solely due to their inability to communicate.
It may be useful to involve family, friends, carers or other professionals to assist you in communication, although you should take care to ensure the instructions you take are those of the individual themselves and that no undue influence is being exerted on them by any third parties.
There is not one universal level of capacity that applies and the degree of capacity required will, therefore, vary depending on the individual circumstances of each case. Generally, however, a more complex estate, or more complex financial circumstances, will require a greater level of cognitive ability and understanding to satisfy the test.
In practical terms, you should consider the following in your estate planning process, when taking instructions from clients:
1) Does the client have any medical conditions that may affect their capacity, or have they shown any signs that make you question whether they have the necessary capacity? If so, you should take extra care when taking instructions and take steps to satisfy yourself that the client has the necessary capacity.
You should document your conversations with the client carefully in your file notes to record how you satisfied yourself as to their capacity. This will help protect against any future questions being raised over decisions that they made or work that you carried out on their behalf.
2) If you do have concerns about capacity, you should consider whether there is anything you could do to assist the client. For example, some clients may be better at certain times of day, or may feel more comfortable in their home environment. These things can affect a person's ability to make decisions and give clear instructions.
Similarly, some clients may require assistance with communication, and you should try your best to help them to communicate in whatever way works best for them to give their instructions. Again, it would be useful to keep thorough notes from your meetings with the client to document the steps that were taken to assist them and how you satisfied yourself as to their capacity.
3) When taking instructions, you should be sure that the client understands the value of their assets and liabilities and that they can understand the implications of the decisions they are making, and any possible risks. If you think the client is struggling to understand, perhaps try and explain it in a simpler way for them. To be sure yourself, it can be useful to ask them to explain the advice you have given back to you so that you know they have fully understood.
Ultimately, if you are in any doubt as to the client's capacity, you should consider whether it is necessary to obtain medical evidence by way of a professional capacity assessment before proceeding with the planning process. Or, if the client has a Lasting Power of Attorney (LPA) in place, whether the attorney should be stepping in at this point to assist.
If your clients don't have LPAs in place now, it is a good idea to encourage them to put them in place as soon as possible while in good health to avoid any complications in the future - and ensure the longevity of your relationship with your clients.
Libby Holding is legal services director at APS Legal and Associates, part of The SimplyBiz Group
The Financial Services Compensation Scheme (FSCS) declared 11 adviser firms in default between 1 August and 31 October.
From January 2020
Eight firms partway through acquisition process
General election on 12 December
Clients and advisers frustrated by red tape