Making financial decisions on behalf of a child

Most children’s lives are significantly influenced by their parents who are empowered by the legal concept of ‘parental responsibility’. Parents make all sorts of decisions for their children until such age as they’re able to do it for themselves. But in some families, that time never comes, because the young person doesn’t acquire the necessary mental capacity.

Mental capacity is someone’s ability to make decisions about their life. This may not develop in a person, or it may become lost through illness or an accident. And the older a young person gets, the more complex it can be to make decisions for them. Parental responsibility ends at adulthood. So, what happens when a child who lacks mental capacity turns 18? Who makes decisions about their finances? And how should those decisions be reached?

The government has published a toolkit to help parents and carers navigate the ongoing challenges of decision-making on behalf of young people – those between the ages of 14 and 25 – who lack mental capacity. I’ve summarised some of the key parts below:

When your child reaches 16

Parents continue to have parental responsibility and so you can make decisions for and about your child. However, in doing that, you must apply the five principles of the Mental Capacity Act:

  1. Don’t make a decision for that young person unless you can show that they can’t.
  2. Support the young person in making their own decision before making it for them (but don’t try to persuade them what to do).
  3. If the young person makes a decision you think is unwise, don’t automatically take over; it doesn’t mean they’re unable to make a decision. But do question their capacity if they: (a) make repeated unwise decisions that put them at risk or harm; or (b) make a particularly unwise, out-of-character decision.
  4. Anything you do, or any decision you make, for or on behalf of the young person must be in their best interests (we discuss ‘best interests’ here).
  5. Before acting, or making a decision, for a young person, ask whether the same outcome could be achieved with fewer effects on their rights and freedoms.

When your child turns 18

A young person has responsibility for making their own decisions when they become an adult. But there are two ways in which you could make a decision on their behalf:

  • By getting their consent (and then applying the five Mental Capacity Act principles above); or, if the young person doesn’t have capacity to consent:
  • By applying to the court for authority to make the decision.

The Court of Protection is a specialist court that safeguards the interests of people who lack mental capacity. It’s a vital part of the system, helping protect some of the most vulnerable people in society. Where the court is asked to look at the situation of a young adult who doesn’t have capacity to make decisions about their finances, it could either make a one-off order (for example, to access money earmarked for a specific need) or, in urgent cases, an Emergency Interim Order. Or the court could appoint a ‘deputy’ to make ongoing decisions on the young person’s behalf. A deputy is often a member of the young person’s family, or a friend or carer.

The guidance makes clear that it’s good to think ahead. If the young person is under 18, but you think they will lack capacity when they reach 18, you could make the application to the Court of Protection in readiness for them reaching adulthood. That way, legal authority for decision-making will be in place when the time comes.

As private client solicitors, we often help clients through the Court of Protection process. We also help families plan ahead by putting lasting powers of attorney (LPAs) in place. These are important documents, but they can only be made when the young person has mental capacity. They appoint a trusted person – an ‘attorney’ – to make decisions about the person’s property and affairs, with specific instructions in place, if that’s what the young person wants.

Similar to a deputy, an attorney is usually a family member, friend or carer. Their decision-making remit could include:

  • Managing the young person’s bank account and investments
  • Paying bills
  • Selling the person’s home.

The LPA could also give the attorney legal authority to access the young person’s child trust fund, which matures when they turn 18.

An attorney must follow the Mental Capacity Act principles. This might mean, for example, that the young person continues to manage their day-to-day expenditure while the attorney takes care of the more complex finances. And any decision made has to be in the young person’s best interests.

Mental incapacity can be extremely difficult to deal with on both an emotional and a practical level. Whether a mental impairment existed from birth, or it took hold later in life, it generally falls to family members to take charge and be up to speed on the protective legal process. The government’s toolkit is a great start, explaining some of the main aspects, but it is important you take professional advice for your specific circumstances.

For for specific help in making financial decisions for a young person, contact Emma Howlett or a member of the Private Client team on 0808 256 2917.

Why a Small Payments Scheme could have a big impact

Anyone who has tried to deal with financial matters on behalf of someone else will know just how many barriers are in place. While there are very good reasons for this, it can be hugely frustrating for well-intentioned family members who simply want to access funds for their loved ones’ benefit.

The Mental Capacity Act 2005 was designed to give some regulation and definition to the issues around supporting people who may lack mental capacity, to make their own decisions, in their own best interests. The law around capacity is famously grey and uncertain, meaning that families/friends and professionals face a potential minefield when it comes to managing the financial affairs of someone who has lost capacity, either temporarily or permanently.

The overarching point is that the correct authority to act for someone who does not have capacity must be in place, if action is required. In some cases, that may be provided through an Ordinary Power of Attorney (OPA), but this can only be made while the person making the OPA (‘the Donor’) has capacity and is only valid while the Donor retains capacity. It is normally used to manage specific tasks that the Donor wants someone to deal with for them, such as the sale of a property or the paying of bills while travelling etc. OPAs are far less frequently used than Lasting Powers of Attorney.

A Lasting Power of Attorney is created while the donor has capacity and its primary difference to an OPA is that it ‘lasts’, which means that it can still be used if or when the donor loses capacity. People make Lasting Powers of Attorney to appoint their attorneys (often a family member or friend) with the intention that they will take over the responsibility for making various decisions over the Donor’s property and financial affairs. Attorneys can act under a Property & Financial LPA while the Donor has capacity and when the Donor has lost capacity.

There is a Health and Welfare LPA, which, unlike the Property and Financial LPA, can only be invoked and used when the Donor has lost capacity or is unable to speak for themselves in terms of their health and welfare needs.

Problems arise where neither an OPA nor an LPA has been prepared and there is no one ready and authorised to step in. Where someone has lost mental capacity, this can be a particularly difficult situation to work through and it often requires the involvement of the Court of Protection to resolve.

The Court may make a ‘one-off order’ relating to a particular decision that needs to be made, or appoint people (‘deputies’) to act in the best interests of the mentally incapacitated person. The role of a deputy is similar to that of an attorney appointed under an OPA or an LPA.

The trouble is that the Court route is often lengthy, costly and it may not be in the best interests of the loved one who needs taking care of.

In some situations, those caring for a person who has lost mental capacity simply need to access small amounts of money, fairly quickly, to meet that person’s needs. It is this issue that has become a focus for the Ministry of Justice, which is currently consulting on proposals to introduce a ‘Small Payments Scheme’.

What would a Small Payments Scheme mean for someone caring for a mentally incapacitated person?

The idea is that they could access small amounts of a mentally incapacitated person’s money without having to go through the process of getting an order from the Court of Protection. It would be an interim measure; something to have in place before long-term arrangements were finalised. The Ministry of Justice points out that the Scheme would be useful in situations in which families, friends and carers find the Court of Protection route ‘too complex or disproportionate to the amount of funds involved’.

The proposals include that:

  • Payments (of up to a combined sum of £2,500) could be made for a six-month period from one account
  • It would be possible to extend those six months once if the £2,500 figure had not been reached
  • The Scheme would be run by financial services firms, such as banks and building societies
  • The Scheme could be used by ‘someone who could prove their suitability, rather than just family members’

The consultation will be open until 12 January 2022, although there is some way to go before we will begin to hear how the views of participants could shape these proposals. A key consideration will be the Scheme’s security, as well as its ability to provide a simpler, faster and more straightforward process to navigate than that which is currently in place. But, as a lawyer who regularly helps families navigate these challenging issues, and as someone who personally manages the affairs of someone who has difficulties, I welcome the attempt to clarify and improve things for those trying so hard to serve and protect a loved one’s best interests.

For advice about OPAs, LPAs or Court of Protection applications, contact Vicky Mansell 0808 256 2917 or email [email protected].

Protecting Britney – the difficult question of control

The much-publicised situation surrounding the private life of Britney Spears has made for illuminating reading for those unfamiliar with the US system of conservatorship.

Following concerns about the singer’s mental health more than a decade ago, the court-ordered arrangement was put in place which saw control of decisions about aspects of her life passed to her father. There have since been various claims that that conservatorship has taken away some of Spears’ human rights, and that too much control has been placed in the hands of others. The #FreeBritney movement has campaigned for the conservatorship to be brought to an end. And it’s been reported that Jamie Spears, Britney’s father, has now filed for that to happen.

Press reports of the types of restrictions placed on Britney, and of her feelings about the conservatorship, have been an uncomfortable read. We don’t know the facts; the details of the arrangement remain private. But for those of us who work to safeguard the best interests of vulnerable people, we’re confident that a situation like that of Britney Spears could be avoided in the UK.

We don’t have conservatorships in England and Wales. Our system is based around the Court of Protection, which steps in where necessary (and where there is no Power of Attorney in place) to protect vulnerable people who can no longer make informed decisions for themselves. The court decides whether or not the person has mental capacity, and appoints ‘deputies’ to make decisions for him or her if capacity is considered to have been lost.

‘Deputyship’ is therefore our version of conservatorship. It is the appointment of one or more adults – usually a family member or friend of the person who has lost capacity – to take care of decisions about health and welfare and/or property and finances. Deputies become responsible for deciding everything, from what should happen to the person’s investments, to where they should live and the healthcare they should receive. (An alternative would be to have an ‘attorney’ appointed under a Power of Attorney, or a Lasting Power of Attorney.)

Deputies don’t have to have any particular qualifications. Sometimes legal or financial professionals are appointed, but this isn’t always necessary. The overriding duty is for the deputy to act in what they reasonably believe to be the best interests of the mentally incapacitated person. Working out what is and isn’t in a person’s best interests may not always be straightforward, and deputies sometimes have a challenging time in deciding how best to handle particular situations. But guidance comes from the Mental Capacity Act, which includes that decisions must not be based:

  • merely on the basis of a person’s age or appearance; or
  • on the condition of, or an aspect of, the person’s behaviour which might lead others to make unjustified assumptions about what might be in their best interests.

Another key principle is that when deciding best interests, steps must be taken (where possible) to allow, encourage or help the person participate as fully as possible in any act done for him and decision affecting him. This is hugely significant, as it seeks to avoid a situation in which a deputy effectively railroads decisions. It reminds deputies that the mentally incapacitated person is the focus and may still have a voice.

There are some additional layers of protection, too. Deputies are expected to file information – including expenditures made – annually, documenting the decisions they have made. And this is overseen by the Office of the Public Guardian.

No legal system is without fault, but having worked with families to take care of loved ones, it’s clear to me that the Court offers vital protection for those most in need. It firmly places the needs and interests of the mentally incapacitated person at the heart of decisions. And I think people and families should take comfort from this. If mental incapacity strikes, there will be layers of support in place.

To talk in confidence about mental capacity, deputyship or about making a Lasting Power of Attorney, contact Emma Howlett 0808 256 2917 or email [email protected].