Ireland: The Assisted Decision Making (Capacity) Act 2015 – What It Means For You As A Financial Advisor

Last Updated: 28 June 2017
Article by Paraic Madigan and John Gill

The Assisted Decision Making (Capacity) Act 2015 (the "Act") will fundamentally change how advisors assess capacity and how they engage with people who have mental capacity issues.

The Act will require a significant adjustment for those needing to assess capacity in the course of their work (including investment intermediaries, financial advisors, accountants, tax advisors, bank officials etc) as they will have to consider the mental capacity of the client relative to what is being done. The test for capacity is now a time and issue specific test (the "Functional Test").

An individual's capacity can no longer be assessed by a blanket "all or nothing" status approach, under which a finding of incapacity was often based on the person having an intellectual disability, rather than assessing the person's decision making capacity. The Act represents a fundamental shift in addressing the issue of capacity. The emphasis has moved towards enabling persons to make their own decisions. The making of unnecessary capacity assessments may be in breach of the Act.

The Act also provides a statutory framework for a number of different types of decision-making intervention options and enables formal agreements to be made by adults, who lack or may shortly lack capacity ("Relevant Persons") to appoint a trusted person (an "Intervener") to assist them.

Advisors to a Relevant Person, who has availed of an intervention option, will need to understand the role of the Intervener and the parameters of their professional relationship with their client's / customer's Intervener.

What is the Functional Test?

Judge Laffoy, in the Fitzpatrick case [1], identified that the Functional Test was the appropriate test for capacity and the Act now puts the Functional Test for capacity on a statutory footing with the focus being to determine the capacity of the person to make a particular decision at a particular time.

The test requires a person's capacity to be assessed on their:

  1. ability to understand;
  2. at the time the decision has to be made;
  3. the nature and consequences of the decision to be made;
  4. in the context of available choices at the time.

The test for capacity is, therefore, issue and time-specific.

The Act confirms that a person lacks capacity to make a decision if the person is unable to

  1. understand the information relevant to the decision;
  2. retain that information long enough to make a voluntary choice;
  3. use or weigh up that information as part of the process in making the decision; or
  4. communicate their decisions.

The challenges posed by the Functional Test for advisors

Under the Act, a person is presumed to have capacity until the contrary is shown, and the burden of proof (on a balance of probabilities) lies with the person asserting lack of capacity. Furthermore, if a finding of capacity or incapacity was to be challenged, an advisor would likely have to justify how they came to that view, based on the legislative criteria. Assessing capacity under the above limbs may be quite complicated and onerous.

For instance, a client, whose capacity is in doubt, may understand their actions of giving investment instructions, but may not understand the consequences of their instructions and thus not have sufficient capacity to give them. Therefore, the financial advisor must take steps to ensure that the client fully appreciates the consequences of giving those instructions, yet the making of an unwise decision does not necessarily mean a person does not have capacity. This could present difficulties for the advisor. This difficulty may be heightened in situations where the advisor does not know the client well but has a duty to assess their capacity (for example, a bank official).

Furthermore, the person must be able to retain the information long enough to make a choice, yet a short attention-span may not rule this out and the use of communication tools does not imply that the person is unable to understand the information.

The Functional Test also allows for fluctuations in capacity – for example, just because a person lacks capacity in respect of a decision on a particular matter at a particular time, does not prevent the person having capacity to make the same decision at another time. Therefore, advisors dealing with someone whose capacity is in doubt may need to assess the capacity of that person on an ongoing basis as circumstances require.

Capacity must be assessed on a person's ability to understand their decisions in the context of available choices at the time of the decision and thus implies they should be aware (or be made aware by their advisor) of their alternative options and the role of the Intervener (if one has been appointed) should also be considered here.

Similar United Kingdom legislation includes a diagnostic test, whereby a medical practitioner will also assess a person's capacity, but this has not been provided for under the Act, and thus it is not sufficient for an advisor assessing capacity to rely solely on a medical assessment.

Given the challenges presented for advisors in how to approach the issue of capacity and when applying the Functional Test, it is crucially important for advisors to identify an appropriate and consistent way to apply the Act's provisions in their day to day work.

What decision-making intervention options are available?

The type of decision making intervention will depend on the level of the Relevant Person's ability to make decisions. The Intervener may assist the Relevant Person in making decisions (assisted decision makers) or may jointly make decisions with them (co-decision makers). The Act also gives the courts power to make decisions on behalf of the Relevant Person or to appoint a decision making representative to make certain decisions on behalf of the Relevant Person (where the Relevant Person has no co-decision maker or in any event, does not have the capacity to make the relevant decision).

It is envisaged that different options may be used at the same time in respect of different decisions, which is clearly complicated for those taking instruction from, or advising, the Relevant Person. The advisor, acting for a client who has availed of a decision making intervention option, will need to understand what impact that has on their advisor-client relationship and the role of the Intervener.

Required actions

We have highlighted two areas of importance for advisors but clearly the practical impact of the Act on those who have to assess capacity of Relevant Persons in their day to day work will present the immediate problem.

It seems likely that the Functional Test provisions will be among the first provisions of the Act to be commenced in the near future and thus now is the time to put a framework in place to deal with these changes.

How we can help

  • Designing Act compliant additional features to be applied at client on-boarding.
  • Drafting compliant suites of assessment documents for staff who will be required to perform tests without recourse to centralised support.
  • Updating standardised suitability and appropriateness documentation to ensure that the Act is considered.
  • Review existing procedures and update accordingly.

Footnotes

1: Fitzpatrick v. K (no 2)[2008] IEHC

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.