Phil Young: Establishing mental capacity to make financial decisions


Whether it is The Adults with Incapacity (Scotland) Act 2000 or The Mental Capacity Act 2005, the message is still the same for circumstances where you suspect a client does not have full mental capacity to make a decision about their financial future.

As advisers typically deal with people over 55 and well into later life, the mental health issues that often accompany age will present themselves from time to time. This can be an emotionally and technically challenging part of the role.

Most of the principles laid out are common sense and already part of good advice. There is a need to assume the client has capacity unless proven otherwise. Worthy of discussion is principle 4 from The Mental Capacity Act 2005. In deciding whether the client is unable to make a decision, the following four factors should be considered:

  1. Does the client understand the information relevant to the decision?
  2. Can the client retain the information?
  3. Can the client use or weigh up the information as part of the process of making the decision?
  4. Can the client communicate their decision (whether by talking, sign language, or any other means)?

In the rush to get an unequivocal response it is important you do not just ask yes/no questions. The legislation specifically cites that as bad practice. You need to ask the client more open questions and ask them to replay information back to you. Check they understand a few minutes after the discussion and ask the same questions in a different way to check the response is consistent.

Part of your job is also to assess whether the client is under any undue pressure from other people. For this reason, your assessment should be done without others present. This might seem unusual but, at this stage, you are simply assessing with the presumption the client does have capacity. Bringing in others is something you would do once a lack of capacity has been established. The Law Society’s recent guidance on this matter is particularly clear.

After this, your job is to refer on where appropriate. It is the responsibility of the medical profession to conduct full assessments and certify whether a client has full mental capacity or not.

Another point often missed is the need for attorneys to try and help clients make their own decisions where possible. This is because in many situations, particularly those relating to old age, capacity is something likely to come and go and so it is almost impossible to establish when it exists and when it does not. For that reason it is best for the attorney to deal with you with the client present. Clearly there are occasions where this is not appropriate: many clients will have granted the power specifically because they do not want to get involved.

Where no power of attorney exists and a client has lost mental capacity, the Court of Protection can appoint a deputy to protect their interests in a similar way. The deputy appointed could be a family member or friend of the client. In the absence of a suitable person, the court will appoint a professional deputy, usually a solicitor. There is much more supervision, due diligence and involvement of the court with a deputy when compared with an attorney. You should request to see the terms of the court order that has been issued in appointing the deputy to see what level of supervision is involved and to check your advice is in line with the powers the deputy has been allowed.

If at any point you feel the instructions given by the attorney or deputy are not in your client’s best interests, or you suspect there is a conflict of interests or undue influence, you can refuse to proceed with the advice. You should explain the course of action would not be in the best interests of the client and why, and try to gain agreement on a more favourable outcome. If this is not achieved and you believe your client is being seriously financially disadvantaged you can inform the Court of Protection. The court will then decide the best course of action.

All this is a considerable responsibility for an adviser. However, demonstrating an ability to act with this level of social concern and responsibility is at the very heart of professionalism.

Phil Young is managing director at Threesixty