We are often approached to prepare a power of attorney for someone whose family member faces illness, mental or physical incapacity, or an inability to manage their own affairs.
A power of attorney is a legal document that enables an individual (the principal), with full contractual capacity, to appoint someone else (the agent) to act on their behalf.
A power of attorney is a valuable tool in various situations. For example, an elderly parent who struggles to handle their affairs due to age may grant power of attorney to an adult child to assist them. However, it is important to note that a power of attorney is typically a temporary solution.
A power of attorney (both general and special) terminates automatically when the principal:
- passes away; or
- becomes insolvent and their estate is sequestrated; or
- becomes mentally incapacitated, rendering them unable to make decisions for reasons such as Alzheimer’s, stroke, mental illness, dementia, coma following an accident, age-related cognitive decline, and more.
The agent’s authority is limited to what the principal can do. If the principal loses legal capacity, the power of attorney immediately becomes void, and the agent can no longer act on the principal’s behalf.
Scenario 3 above often surprises people because it seems counterintuitive for a power of attorney to lapse precisely when itis needed most. In South Africa, a power of attorney remains valid only as long as the principal can understand the concept and consequences of granting someone this authority. When the principal can no longer make decisions or appreciate the legal nature and consequences of their actions, they lack legal capacity.
Additionally, a person suffering from a mental impairment, like dementia, cannot grant a power of attorney since they lack the legal capacity to do so. In South African law, there is no recognition of the concept of an “enduring power of attorney,” which would allow actions to continue after the person granting it loses capacity without court involvement.
Despite their good intentions, family members acting under an invalid power of attorney are acting unlawfully and may be held personally liable for any damages incurred because they lack legal authority to act.
What other options do you have?
- Establishing a trust to manage the financial aspects of an estate while the person still has legal capacity is an option. That will allow for the trustees of the trust to manage the assets. However, this choice comes with costs, tax implications, and other considerations.
- The High Court can appoint a curator when an individual cannot manage their affairs. A curator bonis handles financial matters, while a curator ad personam handles personal affairs like medical consent and living arrangements. Unfortunately, curatorship applications are costly exercises and not a particularly pleasant experience for the principal or the other parties involved.
- A simpler and less expensive option is the appointment of an administrator by a Master of the High Court under the Mental Health Care Act No. 18 of 2002. An administrator can only handle a person’s property, not personal affairs. 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).
If you have questions or are uncertain about the validity of a power of attorney in your possession, please don’t hesitate to reach out to us.