Impact of Mental Incapacity on Shared Finances
It is often assumed that having a joint bank account is a solution to the loss of mental capacity. In fact, it can make matters complicated for both parties. We look at the possible impact of mental incapacity on shared finances.
Having a joint bank account generally means that either party can access funds. Couples often imagine that this will continue should one of them become unable to manage their own affairs. However, banks are reluctant to continue allowing the remaining party to use the account in these circumstances and may choose to freeze an account to protect a vulnerable individual.
This is at the bank’s discretion. They can continue to allow essential payments to be made, such as care fees and day-to-day living expenses. However, for full use of the account to resume, they will generally only deal with an attorney appointed under a Lasting Power of Attorney (LPA) or a deputy appointed by the court under a deputyship order.
How to protect against restrictions on a joint bank account
The best way to plan for the future is to put a Lasting Power of Attorney in place. This is a legal document that gives authority to someone to act on your behalf, should you ever lose mental capacity. You can choose one or more individuals to represent you, and they are known as your attorneys.
You can make two different types of LPA: one for your property and financial affairs and one for your health and welfare. A property and financial affairs LPA will generally authorise your attorney to operate your bank account on your behalf. Once you have signed the LPA, it can be registered with the Office of the Public Guardian. It is then ready to be used, should this ever be necessary.
Your attorney can provide an official copy of the document to your bank, and the bank should then deal with them and allow them access to your account.
What happens if someone loses mental capacity and does not have an LPA?
The situation is more complex if someone has not made an LPA. If they still have sufficient understanding of the situation, they may be able to make an LPA. However, if they no longer have the mental capacity to do this, it will be necessary for someone to apply to the Court of Protection for a deputyship order.
This is an order granting the applicant authority to deal with certain matters for the individual, usually referred to as the patient. The order will specify what actions the deputy can take and may include restrictions. Obtaining a deputyship order can take many months. Until it is issued, no-one can deal with financial matters for someone who can no longer manage their own affairs and who does not have an LPA or the earlier version, an Enduring Power of Attorney, in place.
Obtaining a Lasting Power of Attorney
An LPA specialist will be able to draft a document giving your attorney the authority you want them to have. You can consider what power you would like to pass on and whether you want any restrictions. For example, if you have two or more attorneys, you could allow them to make most financial decisions independently. For major issues, such as the sale of property, you could require them to act together.
When the document is drafted, you can choose ‘people to be notified’. These are individuals who will be told when your LPA is registered ready for use. They will have the opportunity to object, should they have any concerns.
If you would like further information on Lasting Powers of Attorney call us FREE on 0800 781 6658 or email us at enquiries@estplan.co.uk
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