Get a Power of Attorney as joint accounts are now routinely frozen if mental capacity lost

Guidance, issued in 2013 by the British Bankers' Association, on banking for people who lack capacity to make decisions, has made it common practice for high street banks to freeze withdrawals from a joint account if one of the account holders becomes mentally incapable  -  that is until a third party has been appointed to act on their behalf.

It is yet more reason for people to put in place a Power of Attorney and have it registered ready for use.

When a joint account holder becomes mentally incapable the other joint account holder does not have the automatic right to access the account unless a Lasting Power of Attorney or Enduring Power of Attorney is already in place or a Deputy is appointed following an application to the Court of Protection.   The costs of the application process to the Court of Protection can far outweigh the costs of creating and registering a Lasting Power of Attorney in the first place. A Deputyship Order appointing someone to deal with a person’s affairs can often take more than 4 months to be made.

HSBC is one example of a bank that normally cancels the joint authority to withdraw funds if they become aware of the mental incapacity of one of the joint account holders, although HSBC does exempt any direct debits or standing orders already set up. The rationale is that authority for either to sign on a joint account entails a continuing consent - which is broken by mental incapacity.  HSBC will effectively freeze a joint account until an Attorney or Deputy (which they term the Receiver) is appointed.

This restriction can apply to Trust accounts as well as personal accounts - a possible argument for everyone with joint accounts to have a Power of Attorney in place and registered ready for use.

On the whole, banks will allow existing standing orders and direct debits for paying utility and other household bills to continue until the Deputyship Order is made. Withdrawals by the other joint owner are likely to be restricted, highlighting the importance of having a Power of Attorney in place.

People should ensure they have Lasting Powers of Attorney (LPAs), especially elderly people who should consider legal matters before illness or mental incapacity.

Contact us

To speak to a specialist solicitor about a Lasting Power of Attorney, contact Pearson Solicitors on 0161 785 3500

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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