“The number of cases of dementia is estimated to almost triple by 2050” (World Health Organisation)Although the actual prevalence per capita of dementia is reportedly on the decline, aging populations ensure that it is becoming more and more of a problem in society – for older people, their families and caregivers. If someone close to you (normally an aging parent or relative) needs – or may in the future need – assistance with their financial affairs, your first thought will probably be a power of attorney by which the “principal” appoints an “agent” to act for him/her, either for a particular purpose (a ‘special power of attorney’) or generally (a ‘general power of attorney’). You may well have the same thought if you yourself are approaching old age and starting to plan for your future needs. A power of attorney is certainly a quick, cheap and easy solution but be careful – it’s only a temporary one. It is not “forever”!
The downside – automatic termination (just when help is most needed)Of course a principal can cancel his/her own power of attorney at any time, but what is not so well known is that it terminates automatically if and when the principal –
- Dies (an executor is then appointed); or
- Becomes insolvent and his/her estate is sequestrated (a trustee is then appointed); or
- Becomes mentally incapacitated in the sense of being no longer able to make his/her own decisions for whatever reason – perhaps a stroke, coma following an accident, mental illness, dementia, Alzheimer’s, general age-related diminishing capacity etc.
So what are the alternatives?
- The High Court can appoint a “curator” when a person becomes unable to manage his/her own affairs. A curator bonis handles all the person’s financial affairs, a curator ad personam his/her personal affairs (such as giving consent for medical treatment, where to live etc). Unfortunately curatorships are costly, prone to bureaucratic red tape and delay, paternalistic and, being public, demeaning to the principal.
- A simpler and cheaper alternative is the appointment by a Master of the High Court of an “administrator” in terms of the Mental Health Care Act. An administrator only has power to deal with the person’s property (not personal affairs), and this alternative is only available in cases of actual “mental illness” or severe/profound intellectual disability, and only for smaller estates (assets up to R 200,000 and annual income up to R 24,000).
- A trust to address the purely financial aspects might also be worth considering whilst the person in question still has legal capacity. Take advice however on the costs, tax and other implications.
What about an “enduring” or “conditional” power of attorney?In 2004 the South African Law Reform Commission recommended changes to our law to allow for alternatives like –
- An “enduring power of attorney” (or “EPA”) which would remain valid despite the subsequent incapacity of the principal; and
- A “conditional power of attorney” which would come into operation only on the incapacity of the principal.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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