Planning for loss of capacity

An often-overlooked fact is that adults are generally presumed to have decision‐making capacity, unless there is evidence to the contrary. A person may still be able to retain capacity to make decisions relating to their health, lifestyle and their finances, despite a diagnosis of cognitive impairment such as diagnosis of dementia or brain injury.

Whether someone has decision-making capacity can cause disputes and issues in various settings for clients and their advisers. Similarly, third parties who need assistance or information from an individual can also be disadvantaged if they fail to act before a person loses the capacity to assist them.

This paper explores some of the many ins and outs of capacity.

Role of advisers:

The fear of loss of capacity can result in related discussions being avoided or left until a person is so impaired that they cannot actively participate.

Financial and legal advisers can play a vital role in helping clients and their families navigate the complex legal and emotional pathway. Failing to have these conversations before a client loses decision-making capacity can result in clients and their families facing difficulties dealing with government entities, private service providers and financial institutions, especially when the person who has lost capacity held offices in private family companies and trusts.

A loss of capacity discussion will be, by its nature, heavily fact specific. It will need to be informed by the current and expected future decision-making abilities of the individual in question, the rules of the entities and assets over which they exert control, for instance private companies and trusts, and their personal and professional support networks.