What happens with your finances if you lose mental capacity?
Many of us have joint accounts in a household but what happens if you lose the mental capacity to make decisions regarding your property and financial affairs. Who will make those decision on your behalf?
It’s an important question and one that not many of us think about with regards to joint accounts as many would assume you could continue to use the account.
If two people hold a joint bank account and one of the people passes away, the rules of survivorship apply. This means that the surviving partner will automatically become the sole holder of the account and the funds within.
However, this is not what automatically happens when one of the joint account holders lose mental capacity. Survivorship rules do not apply in this situation.
When one of the holders loses mental capacity, they can no longer consent to the joint use of the account and funds. As a result, the bank could then make the decision to freeze the account.
Access to the funds will then be limited to someone acting on behalf of the person that no longer has mental capacity. This may be in the form of a Lasting Power of Attorney (LPA), a Court of Protection appointed Deputy, or an Enduring Power of Attorney (EPA) if such an agreement was made prior to October 2007.
The surviving account holder and the Attorney/Deputy can then work with the bank regarding the distribution of funds.
It is worth remembering that, as every case will have its unique circumstances and each bank has its own policy regarding this area, advice will vary on a case-by-case basis.
In the absence of an LPA or EPA, the bank may make decisions at their own discretion to allow temporary access to limited funds to the surviving joint account holder for essential transactions related to day-to-day living expenses.
This may continue until a Deputy has been appointed by the Court of Protection. This can be a very long and expensive process, often taking months and several thousand pounds to resolve. This can be avoided by an LPA.
We all plan for things, whether this be in the form of savings, marriage, starting a family, purchasing your first home or even pensions, but many of us look beyond that point and plan things that can make life easier when it could be needed the most.
Hayley Wintrup is a caseworker in the private client team at Barker Gotelee Solicitors in Suffolk.
For more information on our range of legal services, including information surrounding LPAs and EPAs, please call the team on 01473 611211 or fill out our enquiry form.
