Posted on 24th January 2007

New Act Highlights Mental Incapacity Issues

Anne Elliott, partner at firm Latimer Hinks is urging people to act soon to safeguard the management of the financial affairs of themselves and their relatives before a change in the law makes the process more complicated and more expensive. The Mental Capacity Act 2005, which in part comes into effect in April, makes provision for people to choose someone to manage not only their finances and property should they become incapable, but also to make health and welfare decisions on their behalf. Currently it is common for older people to sign an 'Enduring Power of Attorney' (EPA) that will remain in force if they are unable to look after their own affairs, perhaps because of dementia. Anne Elliott said: After a person has lost the mental capacity to deal with his or her own affairs the family could discover that they have no legal authority to access bank accounts, sell or make investments, sign documents and - in a worst case scenario - no authority to sell the family home so that their relative can move to a more suitable house. The easiest solution for this is to arrange for a precautionary EPA to be prepared and signed under which an appropriate relative or friend can deal with the person's affairs. However, from April it will no longer be possible to sign an EPA when Lasting Powers of Attorney (LPAs) are introduced, although existing EPAs will remain in force. Anne said: Both EPAs and LPAs have their place and their merits, but if we are looking at managing just financial matters the current EPA would appear much more flexible and far less cumbersome. From April EPAs will be replaced by two types of the new LPA, one will cover property and financial affairs, while the other will cover the donor's welfare and healthcare issues. The formalities for LPAs will certainly be more complex and the costs will be higher. Our advice is to consider signing a precautionary EPA before the new legislation is introduced.