Looking after someone else's finances

Mental capacity is in relation to someone’s ability to understand and to make a decision.

In the context of money advice, it is the ability to manage your property and financial affairs and most importantly to be able to enter into contacts.

In law a person is presumed to be capable of making a contract until the contrary is proved by acceptable evidence. Voidable contracts are those made by people lacking mental capacity.
Both parties to the contract must be aware of the capacity of the people making the contract. An exception to this rule is if someone comes under the jurisdiction of the Court of Protection because it has been established on medical evidence that s/he is incapable of managing his/her own affairs. In such cases any contract would be voidable.

If someone is unable to manage their financial affairs there are ways in which families or carers can apply to act on the person’s behalf.

Appointeeship
is when a person is either unable or unwilling to apply for welfare benefits and the carer can apply to the Benefits Agency to become an appointee. Normally both the carer and the person with the mental illness will be either interviewed or give written authorisation, and the support of the GP or consultant will be required.
Making Decisions: guide for family, friends & carers .

Third Party Mandate
is where a person signs an authorisation so that a third party can have access to a bank account and to sign cheques on behalf of the person who has given the authorisation. This enables a person who is unable to deal with his/her affairs all the time to delegate responsibility for payment of bills when necessary.

Power of Attorney
is a means where one person gives the legal authority to another person to manage their affairs.

Enduring Power of Attorney
is similar to the Power of Attorney but may continue after someone has lost the capacity to manage and administer his/her financial affairs. If the person who ‘lacks capacity’ has considerable assets either in property or in capital, and there is no other person who is willing or able to assist, it is possible to apply to the Court of Protection for the appointment of a Receiver. This is known as Receivership.