Property and finances: capacity matters

The number of applications being made annually to the Court of Protection for the appointment of a property and financial affairs deputy has been steadily increasing since the implementation of the Mental Capacity Act in 2007. Similarly, we have also seen sustained growth for over a decade in the number of Lasting Powers of Attorney (LPAs) being registered annually with the Office of the Public Guardian. Unsurprisingly, the latest statistics, published by the Family Court last month, reveal that there was a decrease in the number of deputies appointed and LPA applications registered during first quarter of 2021 when compared with the first quarter of 2020. It is evident that lockdowns and the wider impact of the pandemic have temporarily reversed long established trends but with COVID measures relaxing and an ageing population, it seems inevitable that the number of applications being made for the registration of attorneys and the appointment of deputies will significantly increase in the months and years ahead.

What is the area or decision requiring a capacity assessment?

We must always keep in mind that many individuals who are suffering from some form of impairment or disturbance in the functioning of their mind or brain are likely
to retain capacity to make many decisions for themselves. It is often inaccurate to state that an individual ‘lacks capacity’ per se. There are, of course, protected parties who lack the capacity required to make any decisions for themselves. However, more often than not, an individual may lack the capacity required to make some of their own decisions and retain the capacity required to make others.

Whenever I’m told that an individual ‘lacks capacity’, my first two questions are always:

• What is the decision that needs to be made?
• What evidence is there?

Before making an application to the Court of Protection for the appointment of a property and financial affairs deputy, it is important to carefully consider whether the individual involved has the capacity required to appoint a property and financial affairs attorney under an LPA. It is not uncommon for an individual to have sufficient capacity to create an LPA, but to simultaneously lack the capacity required to manage all of their own property and financial affairs.

In such circumstances, it is certainly more cost-effective to follow the route of applying to the Office of the Public Guardian for the appointment of a property and financial affairs attorney. However, given that there is no proactive supervision of attorneys, in some circumstances, particularly if there is a large compensation award involved, the
preferred route may still be an application to the Court of Protection for the appointment of a deputy.

In any event, regardless of any medical diagnosis which may have been reached, it is always important to be clear about the specific issues or decisions requiring assessment prior to contacting a capacity assessor. Indeed, the type of assessment required will have a significant impact on the content of the instructions being provided.

Capacity to appoint an attorney (property and financial affairs)

A crucial stage in the preparation of an LPA is the completion of the ‘certificate provider’ section of the form. This involves a suitably qualified professional (eg a registered healthcare professional or legal professional), or someone who has known the ‘donor’ for more than two years, completing a certificate to confirm that the donor has capacity to appoint the attorney(s) and that they are not acting under duress.

In considering a person’s capacity to appoint an attorney, the certificate provider must follow the two-stage test under the Mental Capacity Act 2005 (MCA 2005) by considering whether the individual is suffering any impairment or disturbance in the functioning of the mind or brain (the diagnostic test) and if so, whether this affects the individual’s functional ability to:

• understand the relevant information;
• retain that information;
• weigh up and use the relevant information; and
• communicate their decision.

It is important to consider that any identified limitation in capacity must be because of the identified impairment in the mind or the brain, thus establishing a direct causal nexus between the diagnostic and functional arms of the capacity test.

A key part of the assessment is to ascertain exactly what constitutes the ‘relevant information’ when it comes to appointing an attorney. A good starting point is to ensure that the donor has read and understood s 8 of the LPA—‘your legal rights and responsibilities’. In addition to this, at the very least, the certificate provider should ensure that the donor understands:

• the nature and purpose of the LPA;
• the role of the attorney;
• the options available for the appointment of an attorney(s);
• the theoretical concepts of trust and ‘substituted decision-making’;
• how multiple attorneys can work together and when replacement attorneys may become involved; and
• the practical implications and risks associated with appointing or not appointing an attorney(s).

Crucially, the act of appointing an attorney under an LPA constitutes a ‘one-off’ decision. This means that capacity must be determined at the point of signing the LPA document. Every effort should be made to assist an individual to have capacity to understand and weigh up the relevant information involved. Many individuals will be more likely to have capacity in a given moment if they are supported, at a certain time of the day, or in a specific environment where they feel comfortable. It is certainly possible for an individual who lacks capacity to make decisions in certain moments to have capacity to sign an LPA if supported at the right time. It may be necessary for the certificate provider to visit the individual on a number of occasions to explain the relevant information and to increase the chances of attending at the right moment for the individual to demonstrate their capacity to sign the document.

Capacity to manage property & financial affairs

Assuming there is no power of attorney in place, in order for the Court of Protection to be persuaded to appoint a property and financial affairs deputy, the court must receive evidence in the form of a ‘COP 3 Assessment of Capacity’ that the individual involved lacks capacity to manage their own property and financial affairs.

In contrast to the test for capacity to sign an LPA, the issue of capacity to manage property and financial affairs is considered to be a ‘continuous state of affairs’ as opposed to a one-off decision. This means that when considering an individual’s capacity to manage their own property and financial affairs, it is not enough to simply consider their capacity at a specific moment in time.

In the case of A, B and C v X and Z [2012] EWHC 2400 (COP), Hedley J stated that ‘there would be times when a snapshot of his condition would reveal an ability to manage his affairs, but the general concept of managing affairs is an ongoing act and, therefore, quite unlike the specific act of making a Will or making an Enduring Power of Attorney. The management of affairs relates to a continuous state of affairs whose demands may be unpredictable and may occasionally be urgent’.

When considering an individual’s capacity to manage their own property and financial affairs, it is important to consider wider evidence beyond the assessment of the individual involved. It is not uncommon, particularly for brain injury survivors, for an individual to be able to say all the right things to create the impression that they have capacity to manage their own finances in a certain moment but, in reality, be unable to perform the continuous act of managing their financial affairs. There can be a paradox between what is communicated in the artificial setting of a capacity assessment and what actually happens ‘on the ground’, particularly if the individual involved lacks insight as to the extent of their limitations. With this in mind, when instructing an expert to complete an assessment of a person’s capacity to manage their own property and financial affairs, it is important to ensure that the capacity assessor is given more detailed background information and relevant supporting evidence to help them reach their conclusion.

Information to be provided to a capacity assessor

The reliability of a capacity assessment is usually contingent on the quality of the instructions provided.

There is some basic information which will need to be provided regardless of the specific issue or decision requiring assessment. At the very least, when instructing a specialist certificate provider to complete an assessment of capacity to sign a property and financial affairs LPA, you should provide the following: f full name, address and date of birth;

• details of any diagnosis which may affect decision-making;
• history of any previous powers of attorney which may have been prepared;
• summary of living arrangements;
• basic details regarding any close family, relatives and friends;
• whether there are there any concerns regarding abusive or coercive behaviour; and
• whether it would be appropriate for anybody else to be involved in the assessment including other professionals and/or family.

Capacity to manage property and financial affairs is specific to the individual’s circumstances and the complexity of their financial affairs. The threshold of understanding required to have capacity to manage property and financial affairs will vary depending on the nature of the assets involved and complexity of the financial arrangements. Clearly, the level of capacity required to manage a large estate with multiple asset classes and numerous sources of income and expenditure will generally be higher than the level of capacity needed to manage a relatively modest estate involving few financial transactions.

An assessment of capacity to manage property and financial affairs should encompass both theoretical understanding (eg ‘what is a financial asset?’ etc) and practical issues (eg ‘how can you pay for things?’ etc).

In order for a suitably qualified assessor to fully consider capacity to manage property and financial affairs under the two-stage test within MCA 2005, in addition to the bullet points detailed above, they will also need:

• a summary of assets;
• details of regular income/expenditure and maintenance responsibilities;
• information regarding any likely changes in circumstances, such as a future property purchase or expected inheritances etc;
• details of any employment history, business interests, debts and tax arrangements;
• information regarding any personal injury or clinical negligence claims or awards;
• evidence regarding recent decision- making, together with information regarding historic decision-making, known wishes and views;
• copies of any relevant medical/ therapeutic reports together with support worker records; and
• details of any concerns regarding decision making raised by family, friends or other professionals.

The individual subject to the capacity assessment should not be expected to know all things about every financial subject, but will need to demonstrate an understanding to the level of ‘the average person on the Clapham omnibus’.

Conclusion

There is a clear distinction to be drawn between capacity to make the ‘one-off’ decision to appoint an attorney and the ‘macro’ decision-making ability required to manage property and financial affairs.

If an individual is demonstrating signs of being unable to manage their own property and financial affairs, it is important to consider whether they may be able to sign an LPA to appoint a property and financial affairs attorney before embarking on an application to the Court of Protection to appoint a deputy.

The type of capacity assessment required will have a significant impact on the nature of the instructions required. In general terms, much more information and evidence will be required in order to fully assess an individual’s capacity to manage their property and financial affairs. Even if there is a need for a deputy to be appointed, it is likely that there will be many areas of decision-making that the protected party can (and should) be supported and empowered to deal with themselves.

This article first appeared in New Law Journal www.newlawjournal.co.uk