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It’s hard to think about, but there will come a day when you or your spouse, your parents, or someone you care for will reach a point where you can no longer make decisions for yourself. Then others need to step in to manage their finances, make decisions about their daily lives, or decide what type of medical treatment they should receive.
Enter Power of Attorney, a popularly used, cheap and easy to create legal document that an elderly person can use to select someone with authority to act on that elderly adult’s behalf. However, David Knott of Private Client Trust warns that this document will only fail when it is needed most.
A major problem affecting powers of attorney is that the moment has passed when the applicant can no longer grasp or understand the implications of a decision – in other words, when he or she becomes mentally frail – be it due to dementia, a stroke, a coma, Alzheimer’s, etc. Hence, the main reason for power of attorney is thwarted. Any action taken by the person holding authority after the fellow has become mentally retarded may be overturned and the decision maker may be sued in his or her personal capacity.
“Many people are surprised by this because it seems so illogical that the power of attorney expires exactly when it is needed most. But unfortunately that is the law – as it says in a document from the Ministry of Justice: “In South Africa the power of attorney only remains valid as long as the client is still able to appreciate the concept and the consequences of the granting of his or her other person their power of attorney “.
“It is true that many powers continue to be exercised long after the grantee becomes mentally disabled, but there is always a risk of challenge if events don’t go as expected even though the grantee has acted in good faith,” he warns Knott. “For example, a seemingly solid investment could fail or the sale of real estate could, among other things, deteriorate in a declining market. If the Beneficiary acts dishonestly or with bad faith, it is obvious that they will be liable for any acts against them. “
So what are the alternatives?
According to Knott, the High Court can appoint a curator if a person is no longer able to regulate their own affairs. “Unfortunately, boards of trustees are expensive and prone to red tape and delays.”
“A simpler and cheaper alternative is for the Master of the High Court to appoint an administrator under the Mental Health Care Act. This person only has the authority to deal with the disabled person’s property (not personal affairs) and this alternative is only available in the case of actual mental illness or severe / severe intellectual disabilities and only for smaller goods. “
“A third option, while the individual still has legal capacity, is to set up a trust to place your assets under the management of trustees. This will ensure that on the day that you are unable to manage your own affairs due to an intellectual disability, your loved ones will continue to be cared for and your assets will be administered without interruption. Our team at Private Client Trust works intensively in this area and can help set up a trust, ”says Knott.
For many years the government has been grappling unsuccessfully with the riddle of the power of attorney dilemma. In 2004, the South African Legal Reform Commission recommended changes to our law to allow alternatives such as a “permanent power of attorney” that would remain in effect despite the later inability of the client. and a “conditional power of attorney” that would only come into effect if the client was incapable.
“Unfortunately, nothing concrete has come of this, and while some legal commentators suggest that our courts may maintain properly formulated permanent powers, the general consensus seems to be that they will not be recognized,” concludes Knott.
PERSONAL FINANCE
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