June 11, 2024

What is ‘Capacity’ in Private Client?

This post was written by: Emma Wallace

In the world of Private Client, you might often hear the word ‘capacity’ being used, and what we mean by this is whether person has mental capacity.

Mental capacity is the ability to understand information and to make appropriate decisions. This could be a decision effecting your daily life, i.e., what clothes to wear that day, or could be something more significant such as whether to make a large financial investment.

How is Mental Capacity Assessed?

The Mental Capacity Act 2005 sets out the test to assess capacity. There are five statutory principles which underpin the legal requirements of the MCA 2005:

  • A person must be assumed to have capacity unless it is established that they lack capacity.
  • A person is not to be treated as unable to make a decision unless all practicable steps to help them to do so have been taken without success.
  • A person is not to be treated as unable to make a decision merely because they make an unwise decision.
  • An act done, or decision made, under the MCA 2005 for or on behalf of a person who lacks capacity must be done, or made, in their best interests.
  • Before the act is done, or the decision is made, regard must be had to whether the purpose for which it is needed can be as effectively achieved in a way that is less restrictive of the person’s rights and freedom of action.

How is Mental Capacity Assessed when making a Will?

There is a specific mental capacity assessment necessary to execute a Will is referred to as ‘testamentary capacity’. It is based on a case called Banks v Goodfellow which states that a testator (a person making a Will) must:

  • Understand the nature of making a Will and its effects
  • Understand the extent of the property of which they are disposing
  • Be able to comprehend and appreciate the claims to which they ought to give effect
  • Have no disorder of the mind that perverts their sense of right or prevents the exercise of their natural faculties in disposing of their property by Will.

The Mental Capacity Assessment (above) is used alongside this as  a useful cross-reference.

The ‘Golden Rule’

The golden rule as set out in Kenwood v Adams states that where there is an elderly testator or someone who has been seriously ill, it is advisable that a medical practitioner assess the testator’s capacity to make a will and that they make a clear record of their findings.

Lasting Powers of Attorney (LPAs)

It is important to be aware that once a person has lost mental capacity, they can no longer apply for a Lasting Power of Attorney. Indeed, a person must have full capacity when they put an LPA in place as they must sign this document, understanding the full extent of what this document does and appointing their chosen attorneys.

If someone has lost capacity and you wish to make decisions for them, you must apply to the court of protection for a guardianship which is more time consuming and costly than creating an LPA. This is why you must consider putting LPAs in place early.

We hope that this blog gave you more insight into mental capacity and how it is used in a Private Client context. Should you need any further guidance, please feel free to contact one of our friendly Private Client team members at Ewallace@astonbond.co.uk and Lthomas@astonbond.co.uk