The article below was written for the Financial Times by Gareth Horner, Partner.
If you are not already talking to your clients about the need for a Lasting Power of Attorney, then we would urge you to do so. As this feature explains, once it is too late and the Court of Protection has to step in your clients are looking at losing control of their wishes and creating an unnecessary cost for their estates as well as a needless workload for their loved ones.
Who needs to use the Court of Protection
The short answer is someone who hasn’t already arranged a Power of Attorney. In my experience this falls into two camps; the apathetic and people are who are in denial about their own potential frailty.
It is this latter group where financial advisers can be of most help as very often the client is more affluent and likes to be in control. They also often fear passing control over, but don’t necessarily understand (or acknowledge) that a Power of Attorney creates the control they want as it enables them to be explicit about their wishes.
What the Court of Protection does
The Court of Protection makes decisions on financial or welfare matters for people who can’t make decisions at the time they need to be made, typically because they lack mental capacity.
The Court has may responsibilities including:
It is also worth noting that the Court is also responsible for making decisions about a lasting power of attorney or enduring power of attorney and considering any objections to their registration and considering applications to make statutory wills or gifts.
Court of Protection cases are rocketing as the population ages
The latest Family Court statistics from the end of 2019 show a record number of applications to the Court of Protection. Between July and September 2019 there were 9,407 applications and 12,216 orders were made under the Mental Capacity Act, up 19% and 34%. Of these 26% of the orders related to the appointment of a deputy for property and affairs.
Importantly we expect these numbers to continue to increase because as the population grows older. This is because age is the biggest risk factor for dementia which, in turn, is the primary cause of mental incapacity.
Whilst around 1 in 20 people with dementia developed it at age under 65 the vast majority get it in old age. Above the age of 65, a person’s risk of developing Alzheimer’s disease or vascular dementia doubles roughly every 5 years. It is estimated that dementia affects one in 14 people over 65 and one in six over 80.
This matters as because nowadays many more people have financial products that need management post-retirement / age 65. SIPPs are the most common, but there are an increasing number of people with mortgages and other form of debt that need input.
From a legal perspective we are also seeing people delay their estate planning, often until it’s too late.
Court of Protection powers
Under the Mental Capacity Act 2005 the Court of Protection can make decisions about a person’s finances, health and welfare where that person lacks the mental capacity to do so themselves. The Court also has the power to appoint Deputies to make decisions on behalf of a person who lacks capacity.
The main powers of the Court include making decisions about whether:
The Court can also rule on:
The two types of deputy
A deputy can be appointed to cover all a person’s financial and welfare issues or different people may be appointed depending on their expertise and willingness to undertake different requirements.
Property and financial affairs deputy
Under a property and affairs court of protection order the appointed deputy can take full control of the persons financial affairs. This can include managing pensions or mortgages or other debts, applying for benefits and paying bills. They can also sell a home in order to pay for nursing care.
Personal welfare deputy
This allows a person to make decisions about the individual’s wellbeing and medical treatment.
Issues with the Court of protection
At this stage it’s important to stress that the Court of Protection does what it is required to do by law. Hover it must do this without the guidance of the person concerned. This can be hugely frustrating and even financially devastating for some individuals as whatever was agreed when the person was in good health, unless it is documented in a Power of Attorney, is irrelevant at the point that person mental capacity and a case reaches the Court.
It is very expensive. The Court fees alone could set most people back over £1,000, if the application is contested. This excludes any legal support that typically is required by the friends or family who are trying to do the best by the individual concerned.
Supervision and reporting
It should be noted that you don’t need to appoint lawyers, but objectively speaking the process is not straightforward and can be very stressful for the majority of the population.
Ongoing deputyship fees
Legal fees are typically ongoing, especially if the case is contentious. However, the fees that a solicitor can charge are capped or indeed assessed by the Court, but at a much lower hourly rate than you would expect and below what many would charge for other work, which is why many firms won’t undertake Court of Protection work.
The fee to work up to and including the date upon which the court makes an order appointing a deputy for property and affairs is capped at £950 (plus VAT).
There are also ongoing costs which are also capped.
The maximum annual management fee for a court appointed deputy is £1670 (plus VAT) for the first year, and £1320 (plus VAT) for subsequent years.
Where the assets of below £16,000, the professional deputy for property and affairs appointment may take an annual management fee not exceeding 4.5% of the net assets. And for a health and welfare appointment the annual management fee must not exceed 2.5% of the net assets, capped at £555.
Additionally for annual ‘management’ a charge of £265 can be made for the annual accounts’ submission to the Office of the Public Guardian. Additionally, an HMRC income tax return will likely need completing for which £265 can be charged for a basic return or £600 for a complex return.
While other costs may apply depending on the activity that needs to be undertake it is east to see why many solicitors do not want to take on Court of Protection work.
The £100 is not an ongoing fee.
It’s a lengthy process
Once an application to become a deputy has been signed by all of the proposed deputies it is sent to the Court of Protection
It typically takes a month or two to sort out the application due to making sure that the most appropriate people apply to be a deputy or deterring others, who may have the best of intentions, but are not aware of what the requirements are and the stress that being a deputy can cause.
Having submitted the application the Court aims to issue an Order within 21 weeks of an application being stamped. I say ‘aims’ as many of the local Courts are overwhelmed with work and this is only likely to get worse so many cases are taking well in excess of 21 weeks.
The Court of Protection enables others to handle a person’s financial affairs and welfare when they are not capable of doing so themselves. While the Court is objective in all that it does it cannot take into account a person’s former wishes and thus for many individuals it does not reflect what they wanted. The Court is also expensive, stressful and the process is lengthy.
We therefore urge you to raise the need for a Power of Attorney with your clients, as a small expenditure can resolve all of these issues.