Dementia is a growing problem in the UK. Margaret Kirby explains why advisers and insurers should pay closer attention to the Mental Capacity Act.
Dementia affects more than 830,000 people in the UK and around 23 million in the UK have a friend or family member diagnosed with the condition.
However, 40,000 of these dementia sufferers are younger people, yet only 44% of patients are diagnosed. So the question is: how can you know whether your client has capacity to give instructions?
The Mental Capacity Act 2005 (MCA) provides a statutory framework to empower and protect people who may lack the capacity to make decisions for themselves. It enables people to plan ahead for a time when they are no longer able to make decisions.
Banks, insurers and financial advisers are all bound by the MCA, yet only 30% are implementing it when a client could have capacity issues.
This is despite the fact that the Act covers major decisions about a client’s property and affairs, healthcare, treatment and where the client lives, as well as everyday decisions about personal care.
That said, those professionals who evaluate capacity rigorously as part of their daily practise are only too aware of the impact of a finding that their client lacks capacity.
The structure of the MCA puts banks, insurers and financial institutions in a difficult position as it offers little assistance or guidance with the most basic practical needs of someone with impaired capacity, and there appears little training or adoption to modern circumstances.
This means there are two key areas of risk for insurers and financial advisers:
• When should an assessment of capacity be carried out?
• Who should the insurer and adviser take instructions from where a Lasting Power of Attorney (LPA) is in place relating to property and finance?
I have seen these issues first-hand as a solicitor who has spent 25 years advising the life and disability insurance market set up a charity in 2011 called LegaCare (UK) Ltd that aims to provide peace of mind, dignity and control to people affected by life-limiting/life-threatening illness.
We assist people through the provision of free legal advice and continued support with such matters as employment advice, debt, housing and mortgage issues, childcare and relationship matters, insurance claims, wills, LPAs and probate.
Many of LegaCare’s clients have issues with capacity at some point because of medication, treatment, age or illness. They are assisted by health professionals who communicate to them if capacity is a known or potential issue. Unfortunately, this is not the case for insurance firms and financial advisers.
I would suggest that if you are in doubt about the client’s capacity you should ask yourself: “Is there an impairment or disturbance in the functioning of the individual’s mind or brain?”
If the answer is ‘No’, then the individual has the capacity to make a decision within the meaning of the Act. But if the answer is ‘Yes’, then you need to consider:
• Does the client understand the information relevant to the decision?
• Is the client able to retain the information long enough to use it in order to make a choice or an effective decision?
• Is the client able to use or weigh that information as part of the process of making the decision?
• Is the client able to communicate their decision?
If the answer to any one of the questions above is ‘No’, then the client is considered on the balance of probability not to have capacity to make the decision.
Matters are compounded if the client has appointed an attorney pursuant to an LPA because, if the client retains capacity, then the adviser or insurer must identify who their client is.
They need to see the LPA to satisfy themselves as to whether the LPA is effective and to ascertain what powers the attorney has.
Sadly, many advisers and insurers are unaware of the legality of such documents. Some banks and IFAs do not allow a client’s attorney, for example, to have access to the full range of accounts and products that are available to other clients. This could amount to discrimination.
Alternatively, they ignore the client and take instructions from the attorney – despite the fact the client retains capacity.
As can be expected, cases are on the rise in the civil and criminal courts for discrimination, negligence and assault, as well as referrals to the Financial Ombudsman Service.
So, if in doubt, ensure that you have seen the client, made a detailed record of the meeting and sought the appropriate medical and/or legal professional support if necessary.
If you follow these steps, and there is a complaint or claim, you can prove that the MCA 2005 was applied at the time of taking instructions and no breach to the Act occurred.
Margaret Kirby is the founder of LegaCare