When someone needs formal help managing their money

Arranging to formally manage someone’s money for them is a big step – both for you and the person you’re helping. It means that at some point, you might have complete responsibility for their finances and interests. It’s only the right thing to do if you’re both completely comfortable with it, and if it’s really necessary.

Is a formal arrangement really the best thing to do?

Before you can decide if making a formal arrangement is the best thing to do, you need to understand what the law means by mental capacity.

It will define what you can, can’t, should and shouldn’t do.

Mental capacity is the ability to think, reason and make decisions.

If someone’s mental capacity is going to decline, or already has, you’re right to think about formal, long-term arrangements that let you manage their money for them.

Legally, mental capacity has to be assessed on the evidence. Any such assessment should be

  • decision specific - assessed for each decision and situation  
  • person specific - where they are given as much help as practical to make decisions themselves and 
  • time specific - so they are supported in making a decision at the time most optimal for them

When assessing someone’s mental capacity to make a specific decision, you can’t make assumptions based on someone’s:

  • age
  • medical condition, or
  • because you disagree with the decisions they make.

Someone has lost mental capacity if it can be shown that:

  • they have a condition that affects their brain, and as a result
  • they can’t make a specific decision at a particular time, even when they get the right support.

Conditions that affect someone’s brain can be physical or medical. Sometimes these can be a result of drugs or alcohol. And they can be permanent or temporary.

There are conditions that cause confusion, drowsiness or unconsciousness, such as:

  • a significant learning disability
  • dementia, such as Alzheimer’s disease
  • brain damage – for example, as a result of a stroke or accident
  • some forms of mental illness, such as bipolar disorder, schizophrenia and depression.

How can you tell if someone has mental capacity?

This isn’t a straightforward question. People can have mental capacity for some things, but not others. For example, a person might be able to handle day-to-day spending but can't invest a lump sum.

Also, mental capacity can come and go. Someone with a severe mental health condition might go through periods when they can’t make decisions, but have full mental capacity the rest of the time.

This means mental capacity has to be judged carefully on a decision-by-decision basis.

Even if someone seems to have permanently lost mental capacity, they should be reviewed often. For example, whenever a major decision needs to be made.

If the person you want to help has mental capacity

There are two ways you can help:

  • support them informally when they need it
  • prepare for the future by helping them put formal arrangements in place for when they need them.

Supporting people informally

If someone has mental capacity but finds it hard to deal with paperwork or to keep on top of things, they might welcome some informal help with their finances.

You can do a lot to help people with their money without taking complete control. In many cases, it’s better for them – and less stressful for you – if you don’t take control.

Preparing for the future

If you think the person’s mental capacity is going to decline, it’s a very good idea to encourage them to make a power of attorney that won’t stop working if they lose mental capacity.

It means they’re still in control, but if they do lose mental capacity someone else will be able to step in.

If they decide to make a power of attorney, get things set up as soon as possible – while they still feel well.

If the person you want to help has lost mental capacity

And they haven’t established and registered a Lasting Power of Attorney and appointed you as their attorney, you’ll need to apply to the Court of Protection to get legal permission to manage their money for them.

If someone’s income is only made up of State pension or welfare benefits and no power of attorney exists, it’s usually better to apply to the Department for Work and Pensions (DWP) to become an appointee instead.

This allows you to have their pension or benefit paid directly to you so you can manage it on their behalf.

You can also use an appointee for local council benefits, such as Housing Benefit or Council Tax Reduction.

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MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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