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Mental Capacity Act 2005

Explains how the Mental Capacity Act affects you and how you can plan ahead for when you no longer have the mental capacity to make decisions for yourself. Applies to England and Wales.

What are financial decisions?

Financial decisions are decisions to do with money and debt. For example:

  • Paying bills and household expenses
  • Buying, selling or renting a room, house or flat
  • Using a bank account and credit cards
  • Borrowing money, such as a bank loan
  • Insurance or mortgage from a bank or finance company

Who can make financial decisions for me if I lose capacity?

If you lack capacity to make financial decisions, someone else can only make these decisions for you if they have legal authority to do so. For example, an attorney appointed under a lasting power of attorney.

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

  • Make a one-off decision about your finances
  • Make several decisions about your finances
  • Appoint a deputy to make decisions about your finances on your behalf

If you're on benefits, an appointee appointed by the Department for Work and Pensions could also help manage your welfare benefits. And they can spend your welfare benefits in your best interests. For example, this may be buying you food or paying your rent. But the risk is that this may be someone you would not choose yourself.

How can I plan ahead for when I may no longer have capacity?

If you want to plan ahead for when you may no longer have capacity to make financial decisions for yourself, you could consider making a lasting power of attorney.

You could also consider making a will. This is because an attorney you have named in a lasting power of attorney would be unable to make a will for you if you lose capacity.

What happens if I borrowed money while I lacked capacity?

If you borrow money, the law sees this as a contract. This includes if you borrowed money when you lacked the capacity to understand what you were doing.

You must follow the terms of the contract. But the contract can cancelled in some circumstances. For example, if you can show that the person or organisation you borrowed money from knew or should have known that you didn’t have capacity when you made the contract with them.

If you can't show this, you should still get advice from a money advice organisation such as National Debtline or Citizens Advice. They can help you work out if your repayments can be reduced or renegotiated. 

How you deal with the contract may depend on what type of debt it is:

  • 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'll 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 a loan: If you think you were mis-sold a loan, you can complain to the lender or supplier. You can also do this if you were placed under undue pressure to take out a loan or buy goods. If you can, seek legal advice to see whether you have to pay back the money. You can also contact the Financial Ombudsman.
  • Mortgage payments of rent: If you get behind with your mortgage payments or rent, your home could be at risk. You should get advice as quickly as possible from a housing organisation such as Shelter

This information was published in April 2023. We'll revise it in 2026.

References are available on request. If you would like to reproduce any of this information, see our page on permissions and licensing.

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