The term "capacity" is used so frequently and is often misunderstood. Legal and medical professionals are likely to have a different understanding of this powerful word, which ultimately determines whether someone may or may not be able to do a certain act.
As it is Dementia Awareness Week, I thought it would be really useful to dispel any myths about this word and give some background information on why it is so important.
1. A person with a mental health diagnosis, such as dementia, does not have legal capacity to make decisions.
Do not assume that someone does not have the requisite mental capacity because they have dementia. Every person is affected differently and a diagnosis does not automatically exclude them from making their own decisions. However, if someone has been diagnosed with dementia and they want to update their Will or make a Lasting Power of Attorney (LPA), a capacity assessment should be carried out.
2. A person cannot make a Will or Lasting Power of Attorney if they cannot physically sign their name.
A person can make a mark on their Will (and LPA) or someone can sign a Will at the testator's direction. Please note that a specific attestation clause should be included if you are signing on behalf of the testator.
3. Capacity is only an issue for elderly clients
Capacity should be considered in all cases where someone appears vulnerable due to their age and/or health circumstances. For example, someone aged 20 with learning difficulties may have the capacity to make certain decisions and not others. This reinforces that there is no broad brush rule for capacity – every case has to be decided on its own merits.
Now that we have dispelled some myths, I thought it would be useful to find out what you think the term "capacity" actually means?
As a starting point, let's see what Google has to say.
"Mental capacity is the ability to make your own decisions. When you make a decision you need to be able to: understand all the information you need to make that decision, use or think about that information, remember that information, and be able to communicate your decision to someone else."
Well done Google for that definition – which is better than most!
There are different tests for capacity, which depend on what you are doing. For example, there is a specific legal test for testamentary capacity to be applied when someone is making a Will.
The common law (case law) test set out in Banks v Goodfellow is the correct legal test to follow when assessing if an individual has the necessary mental capacity to make a Will.
Under this test, the testator must:
- understand the nature of the Will and its effect
- know what property they own and what they are giving away in the Will
- be aware of the persons who they would usually be expected to provide for (even if he or she chooses not to provide for them); and
- be free from any delusion of the mind that would cause him reason not to benefit those people.
It is worth noting that in Banks v Goodfellow, Mr Banks suffered from a mental illness which caused delusions of the mind, but the Court held that these delusions did not influence his decision regarding who should benefit from his estate and his Will was held to be valid.
Mental Capacity Act 2005 (MCA 2005)
In contrast, LPAs are governed by the MCA 2005. The Code of Practice published in 2016 is very useful and provides guidance to anyone who works with or cares for adults who may lack capacity to make particular decisions. It is also helpful for attorneys.
The MCA 2005 introduced a new test of capacity, where a person is assumed to have capacity unless proved otherwise. To satisfy this test, it is necessary for an individual to understand all information relevant to the decision that is being made and to include any consequences of the decision that are reasonably foreseeable. Another important point to note is that under the MCA 2005, an unwise decision does not mean that a person does not have a capacity.
One important factor in respect of capacity and one that should always be remembered is that a person may lack capacity to make some decisions, but have capacity to make other decisions. For example, deciding what to wear and what to eat today may be easier than understanding a complicated financial decision.
The MCA test is more difficult to satisfy than the Banks v Goodfellow test, for several reasons:
- Burden of proof
Capacity is assumed unless proved otherwise. Following the Banks v Goodfellow test, the Court will presume capacity and the burden of proof is on the person contesting a Will to raise a real doubt as to the testator's capacity. If real doubt is raised, the burden of proof shifts to the person who claims the Will is valid, to establish capacity.
- Requirement to understand all information relevant to a decision
The MCA 2005 requires the person to understand all the information relevant to the making of a decision. The test in Banks v Goodfellow does not go this far, requiring the testator to understand the claims to which he ought to be giving effect, but not necessarily to remember and understand all the surrounding relevant information.
- Reasonable foreseeability
It is not necessary to understand the reasonably foreseeable consequences of the Will under the Banks v Goodfellow test. It is simply necessary for the testator to understand and consider who he or she ought to benefit.
From a practical point of view, where a client with dementia is concerned, extra caution should always be taken.
In line with the STEP guidelines and the "golden rule", we always ask the client if we can contact their GP or consultant for a medical opinion of their capacity to make a Will or LPA.
If you are concerned about a family member or wish to discuss your Will or make a Lasting Power of Attorney, please get in touch with Alix Langrognat or another member of our Succession & Tax team.