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Mental capacity to manage finances

Planning ahead

It is important to plan ahead and think about putting legal arrangements into place about who would make decisions on your behalf if you were to lose mental capacity to make those decisions (for example, as a result of a brain injury or stroke, a mental health illness, or dementia).

The Mental Capacity Act 2005 sets out your rights and what happens if you lose the capacity to manage or make decisions about your finances.

It also sets out how you can appoint someone to make decisions for you if you lose capacity in the future.

Government advice to help you plan ahead in case you are unable to make and understand decisions in the future.

Even if you're able to manage your money yourself now, it is a good idea to get a Lasting Power of Attorney set up well before you need it - it is more complicated and more expensive for someone to get legal authority to make decisions about your finances and property after you have lost mental capacity.

Lasting power of attorney (LPA) for property and financial affairs

An LPA for property and financial affairs allows you to appoint someone, or more than one person, to help you make decisions or make decisions on your behalf about your property and financial affairs. The person or people you appoint are called your 'attorney' or 'attorneys'. The person or people you appoint should be someone you trust to make decisions in your best interest about your property and financial affairs if you were to lack mental capacity in the future to make those decisions.

When you set up your LPA for property and financial affairs it must be registered with the Office of the Public Guardian. After your LPA is registered, and while you have mental capacity, you continue to be in control of your property and financial affairs. Or you can ask your attorney to help you manage your day-to-day financial affairs (monitoring bank accounts, paying bills, managing savings and investments) and help you with decisions about investments and your property. If you lose your mental capacity in future, your attorney will be able to make those decisions on your behalf.

You can also set up a health and wellbeing LPA - where you appoint someone to be make decisions about things like your medical care, care and support, moving into a care home and life-sustaining treatment. Your attorney for health and wellbeing will only be able to make such a decision on your behalf if you have been assessed as lacking mental capacity to make that decision.

You can set up one or both types of LPAs. You don't need to set them both up at the same time.

Setting up and registering a lasting power of attorney:

You can apply to set up lasting power of attorney online yourself, or download forms and fill them in, or you can get help filling forms in - from a solicitor, or an independent adviser. If you are unsure of the process, or have complicated financial/property matters, or other complex matters, getting professional advice may help prevent problems later on.

My Care My Home works in partnership with Reading Borough Council to provide residents with access to independent financial advisers who are accredited with the Society of Later Life Advisers (SOLLA) and can provide information, advice and offer support with making an LPA. You can phone My Care My Home free on 0800 731 8470.

When the LPA forms are completed they must be registered with the Office of the Public Guardian (OPG).

Managing someone's finances when they lack mental capacity

If you need to manage the finances of someone who has lost mental capacity to make decisions about their financial affairs, you will need to seek legal authority to do that.

Making decisions as an attorney

If you are a named attorney on a registered lasting power of attorney (LPA) for property and financial affairs, you are able to manage the financial affairs and make decisions about finances and property for that person straight away. 

If you are a named attorney on an enduring power of attorney (EPA) set up before 1 October 2007, you will need to register the EPA with the Office of the Public Guardian as soon as the person starts to lose, or has lost, mental capacity.

Becoming an appointee for benefits

To manage a person's state retirement pension and welfare benefits, you must apply to the Department for Work and Pensions to become the person's appointee for benefits.

This only gives you the legal authority to manage the person's state benefits and state pension. If the person has no other financial assets you won't need to do anything else.

Government advice on becoming an appointee for someone claiming benefits

Becoming a deputy for financial and property affairs

If the person has other financial assets (such as private income, savings, investments or property) and there is no registered LPA or EPA, you must apply to the Court of Protection to become deputy for that person's property and financial affairs.

Government advice on becoming a deputy

Finding Independent Financial Advice

If you are managing, or applying to manage the financial affairs of someone who lacks mental capacity, and their financial affairs are complex or their capital assets are significant you may wish to seek independent financial information and advice.

This is especially important if the person has long-term care and support needs and capital assets above the Upper Capital Limit for care and support.

pdf icon Finding Independent Financial Information and Advice [84kb].

Reading Services Guide:

You can find information and advice services on the Reading Services Guide or by calling Adult Social Care on 0118 937 3747

Financial assessment for care and support

If you manage, or are applying to manage the financial affairs of someone who lacks mental capacity, and Adult Care Services arrange care and support for that person, you will need to read our pdf icon mental capacity to manage finances [93kb] section of the Care and Support Charging and Financial Assessment Framework.

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