Many people are unaware that when one party to a joint bank account loses mental capacity, the other party may be restricted in operating the account and using the funds within it. If the Bank or Building Society become aware that one account holder has lost mental capacity, the account may be frozen or restricted to essential transactions only. This is in accordance with guidance issued by the British Bankers Association in March 2013.
Why does this happen?
A joint bank account operates on the premise that both parties give their consent to either account holder operating the account. If one joint account holder loses mental capacity then they lose their ability to give consent. Legally this is a minefield and can put the Bank or Building Society in a difficult position whereby they feel that they have little choice but to limit the transactions or to freeze the use of the account. This applies even if the other account holder is your spouse or child.
What are the options?
The best option is to always be prepared and plan ahead so that you decide who should control your finances if a time were to come that you lost mental capacity.
The best way to achieve this is to make a Lasting Power of Attorney for Property and Financial Affairs appointing an Attorney (who could be your spouse). Your attorney will then be able to operate your accounts on your behalf once the Lasting Power of Attorney has been registered with the Office of Public Guardian. Your attorney will then be able to operate your accounts on your behalf once the Lasting Power of Attorney has been registered with the Office of Public Guardian.
But what if someone does not have a valid Power of Attorney in place and has lost mental capacity to make a Lasting Power of Attorney? Someone would need to apply to the Court of Protection to be appointed as that person’s Deputy under a Deputyship Order for Property and Financial Affairs. This authorises the Deputy to access your accounts and manage the funds under the supervision of the Court.
What can we do for you?
We understand that when someone loses their mental capacity it can be a very difficult time for their loved ones, let alone if you throw in financial and legal issues.
We recommend putting a Lasting Power of Attorney in place now to avoid any such problems in the future. We can assist in making and registering a Lasting Power of Attorney for you to ensure that your affairs are in order.
If you find yourself in a situation where it is too late to set up a Lasting Power of Attorney then we can guide you through the complexities of a Deputyship application.
For individual advice and assistance contact our Wills, Probate and Trusts Team to find out how we can help.