Mental Capacity Act 2005

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Financial decisions

• What are financial decisions?
• What happens if I borrowed money while I lacked capacity?
• Who can make a will for me if I lose capacity?
• Who can manage my finances for me if I lose capacity?
• How can I plan ahead for when I can’t make decisions for myself?

What are financial decisions?

Financial decisions cover your financial affairs and business matters including:

• agreements or contracts
• making a will
• buying, selling or renting a room, house or flat.

They can also cover:

• using a bank account and credit cards
• getting a loan
• insurance or mortgage from a bank or finance company
• paying bills and household expenses.

What happens if I borrowed money while I lacked capacity?

If you borrowed money when you did not have the capacity to fully understand what you were doing, the law sees this as a contract.

You have to follow the terms of the contract unless you can show that the person or organisation you borrowed money from knew or should have known that you did not have capacity at the time to make the contract with them.

If you can show this, then the contract can be cancelled and will no longer have any effect.

If you can’t show this, you should still get advice from a money advice organisation such as National Debtline or Citizens Advice Bureau to see if your repayments can be reduced or renegotiated.

• Contract for necessary goods and services: If the contract was to supply you with necessary goods and services, such as food or domestic heating and lighting, you will still have to pay a reasonable price for these goods and services – even if they knew that you lacked capacity at the time.
• Contract for loans: If you think you were missold a loan, or you were placed under undue pressure to take out a loan or buy goods, you can complain to the lender or supplier. It is important to seek legal advice to see whether you have to pay back the money. You can also contact the Financial Ombudsman.
• Mortgage payments or rent: If you get behind with your mortgage payments or rent, your home could be at risk. You should get advice as quickly as you can from a housing organisation such as Shelter.

Who can make a will for me if I lose capacity?

If you lose capacity before making a will, you cannot name a person to write a will for you. Even an attorney you have named in a lasting power of attorney would be unable to do this. Only the Court of Protection can do this in certain circumstances.

So you should try to make a will while you still have the capacity to do so. If you can, get advice from a solicitor who specialises in wills or from a professional who has a licence to write wills professionally for other people.

Who can manage my finances for me if I lose capacity?

If you haven't made a lasting power of attorney, the Court of Protection can:

• make a one-off decision
• make more than one decision, or
• appoint a deputy to make decisions on your behalf.

If you are on benefits, an appointee appointed by the Department for Work and Pensions could also help manage your welfare benefits, rent payments or mortgage payments. However, the risk is that this may be someone you would not choose yourself.

How can I plan ahead for when I can’t make decisions for myself?

If you want to plan ahead for when you will no longer have capacity to make decisions for yourself, you could consider making:

• a lasting power of attorney, and/or
• a will.

This information was published in November 2017. We will revise it in 2019.

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