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POWERS OF ATTORNEY – TIME TO CHANGE THE LAW?
POWERS OF ATTORNEY TIME TO CHANGE THE LAW?
In South Africa a power of Attorney granted by a parted who is incapable of managing his/her own affairs through mental disorder is normally invalid, even if granted before he/she became so incapacitated.
Accordingly, if a person granted a power of attorney whilst still capable of managing his/her own affairs, and subsequently became incapable of managing his/her own affairs, there would be no one with authority to make decisions on his/her behalf unless the court appointed a curator. The procedure for this will incur costs for the person (both the initial and running costs), take time and make the persons state of health and financial affairs public. In addition, the person who is appointed curator may not be a person whom the incapable person would have chosen.
There is a way around this problem, however, which is to confer a power of attorney which is not cancelled if and when a person loses his/her mental capacity. This is to grant an EPA (an Enduring Power of Attorney), which does what its name suggests it endures. It carries on even after the principal has become mentally incapable of handling his/her own affairs.
An EPA continues until the principal:
· Cancels it while he/she still has the mental capacity, and does so properly; or
· Goes insolvent; or
Or, in the case of a sole or joint (not joint and several) attorney an EPA carries on until the attorney (agent):
In the case of a joint and several power of attorney, the remaining attorney could continue to act even if one or more of the others drops out for any reason.
An EPA will also come to an end if it is granted for a fixed period of time, and that time expires.
There are practical advantages in granting an EPA while a person still has mental capacity:
- Becomes mentally incapable;
- Is sequestrated.
CHOOSING AN ATTORNEY(S)
Let us assume that a person has decided to consider granting someone an enduring power of attorney (EPA). He/She will have to remember that the attorney will have access to all his/her money, business affairs and property at a time when he/she does not know what is going on.
An attorney with full powers will be able to:
- The attorney will have a document to prove he/she is acting for the person;
- The attorney will have authority to operate the persons bank account even if the person loses mental capacity.
- If the person has shares of other investments, the attorney will be able to buy and sell them on the persons behalf;
- The person can organise for himself/herself in his/her own way, while he/she still has mental capacity;
- An EPA is cheaper, quicker (although in an emergency, a potential curator can ask for an interim order to tide them over) and less bureaucratic than a curatorship.
Naturally a person should not appoint an attorney who might abuse the power he/she will have over the person at a time when the person is at his/her vulnerable. If there is a risk of this, it is clearly better not to appoint an attorney at all than to risk this happing.
The person should choose someone who understands him/her and is in tune with his/her way of thinking, someone who will use his/her money wisely.
The attorney should be a person who:
- Move money in and out of the persons bank account;
- Move money in and out of the persons savings account;
- Manage the persons business;
- Buy and sell goods on behalf of the person;
- Buy and sell shares on behalf of the person.
An important consideration is whether the person would want a family member or a professional to be the attorney.
Family member will generally be more accessible and less expensive than professionals, but will they carry out their appointment satisfactorily? A family attorney must apply the same skill and care in administering his/her affairs as he/she would if he/she were handling his/her own affairs. The person would have to ask himself/herself how well his/her potential attorney handles his/her own finances.
A professional attorney, such as a practising Attorney, must apply a professional standard of skill and care. Other reasons why a professional attorney may be the best option are:
- Is accessible for most purposes;
- Is not too busy to do carry out his function;
- Is trustworthy, someone with total integrity who will carry out the task with utmost good faith;
- Is organised;
- Is reliable and who will not give up the appointment if there are hurdles to overcome;
- Is reasonably competent in financial matters, and who would take professional advice when needed;
- Understands the persons way of thinking and the way the person would like his/her wealth used.
Two useful enquiries to determine whether a person is suitable to be appointed as an attorney are:
- A family is not under a contractual duty to act, and can therefore give themselves an easy ride. A professional attorney will have a contractual duty to the person and, very possibly, a duty of care to his/her family, and could accordingly be liable for the consequences;
- All attorneys are expected to keep accounts, but those maintained by professional attorneys must comply with the accounting rules of their own professions;
- If a person has substantial wealth, he/she would have to consider whether a lay attorney would be able to handle the persons affairs effectively as a professional would, and also whether would be fair to expect this of them.
If the attorneys are to have joint powers, then they must act together. In order to be binding, any decision they make must be unanimous.
- Should this person to have access to the wealth?
- How efficiently do she/he handle his/her own affairs?
- The joint attorneys police each other;
- As their decision must be unanimous, it is more likely that they will think them over.
If attorneys have joint and several powers, they can act and make decisions either together or separately.
- If one dies or is sequestrated, or mentally incapable of performing his/her duties, or resigns, the EPA becomes ineffective;
- Even the temporary absence or illness of one attorney will hold up business.
- If one attorney dies or becomes sequestrated, or mentally incapable performing his/her duties, or resigns, the EPA could still be valid;
- If one attorney is temporarily absent or otherwise unavailable, business can continue as usual.
An EPA might be intended to be temporary, or a person might impose restrictions by:
- One attorney could end up committing the other(s) to things they disagree with;
- Joint and several powers dilute the control that the attorneys exert over each other.
THE ATTORNEYS DUTIES
Although the attorneys primary duty would be to manage the affairs of the person for his/her benefit, the attorney might also have an implied power to benefit other people in the way the principal has in the past, or would in the future. This is particularly important where the person has dependants for example, if he/she has a spouse, partner, parent or children relying on his/her income. In order to avoid doubt about the extent of the obligations, these people could be specified in the EPA.
The attorney would have the following duties:
- Limiting the property and assets available to the attorney, and/or
- Limiting what the attorney could do with the property.
- To act always with utmost good faith in his/her dealings;
- To keep good accounts and records;
- Not to engage in transactions between himself/herself and the person without revealing it beforehand;
- Not to make secret profits;
- Not to