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 –
It’s this last scenario that catches most people unaware, because it seems so illogical for the power of attorney to lapse just when it’s needed most.
But that, unfortunately, is the law. An agent can only do what the principal can do, so if a principal loses legal capacity, the power of attorney immediately fails. Or as a Department of Justice document neatly puts it: “In South Africa the power of attorney remains valid only for as long as the principal is still capable of appreciating the concept and consequences of granting another person his or her power of attorney”.
In practice there are probably many cases of powers of attorney continuing to be used to everyone’s benefit long after the principal has lost formal capacity, but an agent in that situation acts without authority and risks personal liability for doing so if the validity of anything done under the failed power of attorney is challenged.
So what are the alternatives?
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 –
Unfortunately nothing concrete has as yet come of that, and although some legal commentators suggest that our courts might perhaps uphold a properly-worded EPA, the general consensus appears to be that they will not be recognised.
It boils down to this – take full legal advice on your particular circumstances.
This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)