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The financial implications of a loss of capacity

Although there are many ways people may lose decision making capacity, dementia is the most common – being the second leading cause of death of Australians.  In 2021, there are an estimated 472,000 Australians living with dementia – around 1 in every 10 people over 65.

It can be an extremely stressful and overwhelming experience – not only for the person starting to develop dementia, but also for those around them as they see significant changes in their loved one.

Of course, getting emotional support is critical, but it is also extremely important to consider the financial and legal implications of the loss of capacity in a partner. Whilst an intellectual disability diagnosis, such as dementia may not necessarily preclude preparing Enduring Powers of Attorney, it is important to consider the financial effect of your individual circumstances if one is not prepared.

Some things to think about include:

  • Are your bank accounts joint, or are there accounts held in your partner’s sole name? If accounts are in joint names between yourself and your partner, you will be able to continue to use them.  However, if your partner holds accounts in his/her sole name, you should not be accessing these funds – which may cause issues if you rely on these funds being available for you.
  • How is your house owned? Unlike a bank account, if you and your partner are both on a land title, you will not be able to refinance or sell the property without both signatures. If your partner has lost capacity, they then cannot sign legal documents (such as a sale of land, or refinance documents).
  • Whose name is on your telephone account, internet account, gas / electricity (etc.)? If any services are in your partner’s name, you may find it difficult to renegotiate contracts, or change service providers.
  • Does your partner have any interest in a private trust, company, or self-managed superannuation fund? If so, what is likely to happen to the control of the entity if they do not have the capacity to act as a director or trustee?
  • Do you need to be able to make decisions on your partner’s behalf – for example, medical decisions for refusal of particular medical treatment or engagement of care services?
  • Is your partner’s Will up to date – that is, does it achieve what they would currently want to achieve upon their death? In early stages, a person with dementia may still have enough capacity to update their Will, but after a certain point they will no longer be able to make changes.

Of course, it is not always possible to know in ‘early stages’ if someone is going to lose capacity – for example, a brain injury resulting from a motorcycle or car accident comes on suddenly and has immediate results.  It is a good idea for everyone to consider an Enduring Power of Attorney at every stage of life.

If your partner has lost capacity and there is no Enduring Power of Attorney, an alternative is to make an application to the Victorian Civil and Administrative Tribunal for the appointment of an Administrator (for financial decisions) and/or Guardian (for lifestyle decisions).

For further information, refer to our next article “Managing Assets without an Enduring Power of Attorney”.

Please do not hesitate to contact our Wills & Estates and VCAT Team at Burke & Associates Lawyers for further information.

Insight written by Rohani Bixler

Contacts

Rosy Roberts

Principal

Rosy Roberts

Principal
LL.B (Hons) B.A GAICD
Rosy has extensive experience in Litigation & Alternative Dispute Resolution having represented clients in all Victorian State Courts and the High Court of Australia. She is also a VCAT appointed Administrator.

Meghan Warren

Principal

Meghan Warren

Principal
LL.B GAICD B.Bus (FinPlan)
Meghan is one of the few lawyers in Australia admitted in the State (Victoria) and Federal jurisdictions of Australia, and as an Attorney at Law to the New York State Bar in the United States.

Rohani Bixler

Special Counsel

Rohani Bixler

Special Counsel
LL.B (Hons) BA (PSYCH)
Rohani holds a Bachelor of Arts (Psychology) and a Bachelor of Laws (Honours) from Monash University, and has practiced exclusively in the areas of estate planning, deceased estate administration and estate litigation and disputes since...

Luke Palmer

Associate

Luke Palmer

Associate
LL.B BA
Luke is passionate about making things as simple as possible for people who are dealing with the loss of a loved one.

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