Loss of Mental Capacity

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As many of our parents grow into the latter years of their long life, the effects of age on the elderly mind can often be observed. This effect can be gradual with the gradual onset of Illnesses such as dementia and Alzheimer’s, but can also be sudden, following a fall or other stressful event in the life of the elderly person.
Given the nature of the illnesses that affect the elderly in the later stages of life it is often the case that once mental capacity is lost it is rarely regained. The loss of mental capacity is usually determined by obtaining an expert medical opinion or undergoing a mental test.

What happens once a person loses mental capacity?

Once it is determined that that a person no longer has capacity the following consequences flow :

  • Any Enduring Power of Attorney will need to be use, giving the nominated attorney the ability to make financial decisions on behalf of the donee.
  • The Enduring Guardianship is activated, giving the nominated guardian the power to make decisions relating to the medical care and housing of the donee.
  • The person lacking capacity is unable to make will or alterations to any existing will.
  • The person lacking capacity is unable to appoint an enduring power of attorney or Guardian.

Unfortunately, it is often the case that clients come to see us when it is too late and a parent is no longer able to sign legal documents.
Loss of capacity without a valid will (Intestacy)

If a person loses capacity before making a will it will cause the rules of intestacy to govern what happens to their estate when they do pass. Not only will this cause unnecessary expense to the estate and give rise to possible litigation over how the estate is to be divided, but may also result in the estate of the deceased being distributed in a manner contrary to the deceased’s intentions.
Furthermore any alterations made to a will after a person has lost capacity can cause the will to be contested and result in lengthy and costly legal disputes.

Loss of capacity without an Enduring Power of Attorney and Enduring Guardian

If a person loses capacity before appointing an enduring guardian or attorney the remaining family members need apply to the guardianship division of the NSW Civil and Administrative Tribunal (NCAT) to have an attorney or guardian appointed.

For decisions relating to health and lifestyle NCAT can appoint a family member/ friend or, the Public Guardian.

For financial decisions NCAT can appoint a family member/ friend (who will be subject to the directions of the NSW Trustee & Guardian) or the NSW Trustee & Guardian.

This will cause extensive delay and a significant strain on the family as they will now need to battle with the bureaucracy of a government arm whilst trying to ensure that the loved one receives the care that they require at that later stage in their life and that their financial affairs can be managed.

Any financial decisions such as the sale of a house to pay for an accommodation bond in a retirement village can be extensively delayed and significant additional costs will be incurred.

How to avoid this:

While none of us want to think about our parents’ (or our own) later stages of life, it is important to get a few legal things in place in advance to reduce the stress and expense later:
• Do you and your parents have current wills?
• Do you and your parents have enduring powers of attorney?
• Do you and your parents have enduring guardianships and advanced care directives to make medical decisions?