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Handling Another Person’s Finances

The Mental Capacity Act 2005

If you need to manage someone else’s affairs because they lack capacity to do so themselves, the Mental Capacity Act 2005 for England and Wales sets out who can act on their behalf, and when and under what circumstances they can do so. The Mental Capacity Act works on the assumption that, where possible, people should be enabled to make their own decisions unless they clearly lack the capacity to do so. Any decision must be made in the ‘best interest’ of the person on whose behalf the decision is made. Legal mechanisms (including Lasting Power of Attorney, Enduring Power of Attorney or applying to the Court of Protection) are in place to protect both you as the decision maker and the person being cared for.

The Five Clear Principles of The Mental Capacity Act 2005

  • Every adult has the right to make his or her own decisions and must be assumed to have capacity to make them unless it is proved otherwise.
  • A person must be given all practicable help before anyone treats them as not being able to make their own decisions.
  • Just because an individual makes what might be seen as an unwise decision, they should not be treated as lacking capacity to make that decision.
  • Anything done or any decision made on behalf of a person who lacks capacity must be done in their best interests.
  • Anything done for or on behalf of a person who lacks capacity should be the least restrictive of their basic rights and freedoms.

Power of Attorney

A power of attorney is a legal document authorising one or more persons (the attorney(s)) to act on behalf of another. A Lasting Power of Attorney (LPA) or an Enduring Power of Attorney (EPA) would allow you, either alone or with a jointly appointed attorney(s), to make decisions on behalf of a person if, at a time in the future, they were to lack capacity or were no longer able to make decisions themselves.

As a result of the Mental Capacity Act 2005 being fully implemented, with effect from 1st October 2007, ‘Lasting Powers of Attorney’ (LPA) replaced ‘Enduring Powers of Attorney’ (EPA) although, EPAs drawn up before October 2007 can still be used. In the event of someone becoming non-compos mentis, a valid LPA or EPA should dispense with the need for the complicated and possibly costly procedure of applying to the Court of Protection to administer the person’s affairs.

Lasting Power of Attorney (LPA)

There are two types of LPA, The Property and Affairs LPA and The Personal Welfare LPA. The two are quite separate and distinct from each other and you would need separate LPA’s to cover both areas. The Property and Affairs LPA provides consent to allow attorneys to make decisions about property and finance and a Personal Welfare LPA provides consent for the attorney to make decisions about the person’s personal welfare.

Enduring Power of Attorney (EPA)

An Enduring Power of Attorney drawn up before 1st October, 2007 can still be used as a legal document. Unlike an ordinary power of attorney an EPA continues in force even if the person becomes mentally incapable of managing their affairs.

The most significant difference between an EPA and the new LPA is that an EPA can be used like an ordinary power of attorney, without registration, until such time as the person no longer has capacity, when it has to be registered with the Office of the Public Guardian (OPG) and it continues (endures), whereas LPA can be used only once it is registered.

No Power of Attorney?

If no LPA or EPA exists when it becomes necessary to handle someone else’s affairs, it may be necessary to involve the Court of Protection (providing protection for people who are incapable of handling their own affairs) which will appoint ‘Deputies’ to make decisions, declarations, or orders on financial or personal welfare matters on behalf of the person who lacks capacity. The Court of Protection serves England and Wales; different bodies serve Scotland and Northern Ireland.


If someone’s income comprises only welfare benefits and a State pension, and no EPA or LPA exists, then, rather than having to apply to the Court of Protection to become a Deputy, application can be made to the Department of Work and Pensions to become an appointee to receive and disburse the income of the person who lacks the mental capacity to do so themselves.

Independent Mental Capacity Advocates (IMCA)

The Mental Capacity Act makes provision for what is called the Independent Mental Capacity Act Service to represent people who lack capacity and do not have anyone close who can be involved in decision making. This service provides an independent person (advocate) qualified to represent the person’s best interests when important decisions are being made about them. Local authorities and NHS Trusts are required to consult the advocate where decisions need to be made about serious medical treatment or moving someone in this situation to a hospital or care home.

More about IMCA Advocates