We should all plan for our future. We should have a current Will in place, especially if we need to make arrangements for children or pets. Many people also benefit from formal documents that cover a time when they cannot make decisions themselves. These arrangements have different names across Australia. They all work in a similar way. They appoint someone you trust to make financial or personal decisions in your best interests.
However, you can only make these arrangements while you still have legal capacity. Your loved ones cannot create a Will for you or appoint a power of attorney once you lose capacity.
What Is the Presumption of Capacity?
You need legal capacity to make a Will, sell property, take out a loan, invest money, appoint a power of attorney, appoint a guardian, or sign a contract. Capacity means you understand the facts. It also means you can weigh up the choices and understand the consequences. You must then make a decision based on that understanding.
In Australia, the law presumes that every adult has capacity. Children do not have this presumption. The law assumes they need help from parents or guardians.
This presumption can be challenged with evidence. An adult may lose capacity due to an intellectual disability, brain injury, dementia, or mental illness. In those cases, decision-making ability may be affected.
How Do You Determine If Someone Has Capacity?
It is not easy to assess capacity. No single legal definition exists for “mental capacity”. Different decisions require different levels of understanding.
This makes assessment complex. Each situation must be reviewed on its own facts. Legal and medical professionals often work together to assess capacity.
What Capacity is Required?
Capacity is not a label that removes all decision-making rights. A person may have capacity for some decisions but not others. Each decision is assessed separately.
A solicitor usually assumes a client has capacity at first. If concerns arise, the solicitor may seek a medical opinion. For example, the question may become whether the person understands what a Will does.
Different decisions require different levels of understanding. A person may have enough capacity to make a Will but not manage complex finances. A person may also revoke a Will but not appoint an attorney. The law focuses on the complexity of the decision, not a general status of capacity.
What Can I Do for My Loved One?
People often ask a solicitor to appoint them as attorney for a loved one who is losing capacity. Only the person themselves can appoint an attorney. They must make that decision while they still have capacity.
A power of attorney gives significant authority. It allows another person to manage financial and personal matters. Because of this, the law treats it as a high-risk appointment.
If someone has already lost capacity and has no arrangements in place, you must apply to the Tribunal in your state or territory. The Tribunal can appoint someone to manage their affairs.
Conclusion
Good planning protects you and your family. You should put a Will and decision-making documents in place early. Waiting until capacity becomes an issue can remove your options.
This is general information only and does not constitute legal advice. If you or someone you know needs help or advice, please contact us on 07 5576 9999 or email [email protected].
