The pandemic has highlighted the extent to which all of us depend on others. However, some may experience greater difficulty in coping with life’s challenges – including handling their financial affairs. Clients may have concerns about members of their family or friends who fall into this category. Our capacity team provide answers to difficult questions on the topic of vulnerability.
I am worried about the mental capacity and wellbeing of a member of my family. They may not be able to handle their financial affairs by themselves. What should I do?
Caroline Russell, an associate in our private client team, suggests asking the family member if they have seen their GP recently. “GPs are often best placed to detect a change in behaviour, particularly if they have known the family member for a long time. They can also help arrange a formal capacity assessment if necessary.
“It can also be helpful to find out if they have a solicitor. A solicitor may be able to tell you if a financial Lasting Power of Attorney (LPA) is in place. Alternatively, you could request a search of the LPA register held by the Office of the Public Guardian (OPG).”
Caroline suggests that a holistic approach is required. “It’s essential that family members, doctors, lawyers, investment managers and care providers work together to produce an effective plan for a vulnerable person.”
When does a person become vulnerable? Could it also cover a young person who has come into money unexpectedly and is at risk of being taken advantage of? Or individuals with addictions?
Caroline highlights that there is a distinction between being vulnerable and not having capacity. “You can be vulnerable but still have full mental capacity – for example, a 20-year-old inheriting millions of pounds. This is where the importance of good estate planning comes in. We advise our clients to ensure that their wills have safeguards in place to avoid a large transfer of funds at a young age.
“The key difficulty with capacity is that it is fluctuating. You can have capacity one day but not necessarily the next. This is the case for those suffering with addictions and conditions such as dementia.”
Richard McDermott, a partner in our private client team, highlights that it is important to empower the individual to make their own decisions when they can, with assistance if needed. “It must not be assumed that just because somebody has been diagnosed with a mental health condition that they do not have capacity.”
I oversee the investments of a vulnerable family member. What are my legal responsibilities?
Richard explains that the answer will depend on the capacity in which you oversee their investments.
“As a trustee, an attorney or a court appointed deputy you have responsibilities to maximise the return on their investments, so it is important to take independent financial advice if appropriate in the circumstances.”
“As an attorney or a deputy, you will be stepping into the shoes of the vulnerable person. You must act in their best interests based on an objective test, so even if they have made high-risk investments in the past, that doesn’t mean you should do the same.”
Richard adds: “You should always consult the vulnerable person and allow them to make their own decisions where possible – for example on smaller matters that they may still have capacity to decide.”
A vulnerable member of my family is drawing on their investments inappropriately and may be being taken advantage of. What can I do?
Caroline and Richard emphasise that just because someone is making bad decisions does not mean they are not capable of making any decisions. “The key question from our perspective is whether the family member has capacity. A big change in their investment strategy could be an alarm bell.
“It may be in their best interests to have a capacity assessment done because, if it confirms that they do have capacity, the transactions they enter into cannot be attacked on that ground at a later date.”
Caroline adds, “If there are concerns somebody is being taken advantage of, it is important to try to meet with them one-to-one so you can be confident that you are hearing what they truly want. This is more difficult in a Covid world – there is always the risk that someone is standing just “off screen” exerting pressure. Face-to-face meetings are definitely preferable if they can be done in a Covid compliant way.”
I want a family member to take responsibility for my investments while I receive treatment for a serious illness. What are my options?
Richard observes “some people may want others to step in to take over investments while they focus on their treatment. The most important choice here is who should step in. You may wish to appoint a family member, but where things are more complex you can also appoint a professional to act alongside them. This would allow the professional to step in to provide guidance on more difficult decisions.”
Richard also recommends putting an LPA into place as far in advance of your treatment as possible, as LPAs are not valid until registered. The OPG states that registration is currently taking up to 12 weeks due to high volumes of applications during the Covid-19 pandemic.
How can a trust be used to help manage investments on behalf of a vulnerable family member?
Bryony Cove, a partner in our private client team, explains that trusts may not be the most tax efficient option for vulnerable persons unless they receive the highest level of Personal Independence Payment or receive an attendance allowance for the elderly.
“If there is an existing trust in place, for example if the family member is a widow with an interest in a will trust, then the trustees can manage those investments without an LPA. If all the income of that family member comes from local authority allowances and/or a will trust this can be helpful, as an attorney won’t need to have much, if any, involvement.”
Have you seen any difference in how the Court of Protection (the court) has dealt with matters this year?
Charlotte Fraser is a partner and Georgina Hammond is an associate, both in our disputes team.
Charlotte observes that the court has been inundated with emergency health and welfare LPA applications as a result of Covid. “During the pandemic there has been a significant backlog, and even urgent applications are taking longer to process. It is important for those working with vulnerable individuals to plan effectively in advance and account for this delay.
“Despite this, the approach of the court has not changed – staff are very alive to the sensitivity of the cases they handle and aware of the pressure vulnerable clients may be under.”
Georgina notes that from a practical perspective, there has been a shift to holding hearings remotely. “The court has offered practical guidance on the changes that have taken place, however there are still challenges for vulnerable clients. Some medical assessments are now being conducted remotely, sometimes even solely based on the case papers. Clients are understandably concerned about how accurate and influential these will be.”
Has the pandemic had an impact on the instructions you received as lawyers in 2020?
Our capacity team all agree that ensuring clear communication and a true reflection of the wishes of vulnerable clients have been central themes in the instructions they have received during the pandemic.
Charlotte adds that communication can also be strained when people are far apart, isolating from others or just less familiar with video calling technology. “We are now reliant on remote communication with vulnerable clients at a time where their mental health may be under greater strain due to the pandemic. In more contentious situations where family members are arguing over control, maintaining this contact with the vulnerable person and being aware of their wishes is very important.”
Richard and Charlotte conclude: “It is very important that we discuss capacity with our clients if they are vulnerable or have complex financial arrangements, so we can put measures in place as early as possible to avoid the challenges that arise from a sudden loss of capacity. Putting an LPA in place can circumvent considerable issues in the future and provide peace of mind for our clients, at a time where they may be under considerable stress and concerned for their health due to the pandemic.”
This article was originally published here on 4 January 2021, and is reproduced with kind permission of Cazenove Capital.
If you require further information about anything covered in this article, please contact Richard McDermott, Charlotte Fraser, Georgina Hammond, Bryony Cove or Shivani Khosla, or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, February 2021