Individuals young and old should carefully consider what would happen to them if they were to become mentally or physically unable to handle their personal and/or business affairs.

Mental disability can happen to anyone, whether caused by a stroke, brain aneurysm, road traffic accident, or industrial accident. Such injuries can be temporary or permanent, and that is why it is vitally important that, while an individual possesses sufficient mental capacity to handle their affairs, they ensure that their personal and business affairs are in order. This includes executing an Enduring Power of Attorney.

An EPA is a legal document that authorises another person (hereinafter referred to as the “donee”) to do things on your behalf that you could lawfully do for yourself if you had legal capacity to do so. An EPA will also remain valid and effective during any subsequent legal incapacity of the person giving the authority (hereinafter referred to as the “donor”). Although it is not legally necessary to register an EPA for it to be effective, an EPA can be registered to serve as a public notice that it exists and is effective.

An EPA is valid once executed and can become effective in either of two ways, the first being immediately upon the signing of the document and the second upon the issuance of a medical certificate from the donor’s primary physician attesting whether the donor has sufficient capacity to handle their personal and business affairs.

It is rare that a person will admit that they do not have sufficient mental capacity to handle their affairs, especially if they consider themselves to be independent individuals or the primary decision maker or income producer of the home. Therefore, family members or friends of the donor typically make the necessary arrangements for the donor to be medically assessed when they notice changes in the donor’s behaviour, in particular their inability to manage their affairs or, as highlighted in recent articles, where they suspect the individual is being financially exploited and/or physically abused. The signs of diminishing mental capacity could be situations where bills are not being paid, or appointments are being missed when the donor has always been a very organised person, or even dramatic changes in their financial stability.

Other times, the loss of mental capacity can be sudden, caused by a stroke or road traffic or industrial accident and the individual’s loss of mental capacity is abundantly obvious.

In all circumstances outlined above, an EPA is an important estate planning tool.

Powers that are typically given in an EPA include the ability of the donee to access the donor’s bank accounts, to manage the donor’s investments and/or pay the donor’s bills, collect and/or pay the donor’s rent and/or mortgage and to sign documents on the donor’s behalf. All actions of the donee exercising his/her powers under the EPA must be in the best interest of the donor.

An EPA can be revoked in two instances, the first being when the donor has regained capacity to revoke the EPA, and the other being upon the death of the donor. Upon revocation of an EPA, the powers of the donee to handle the donor’s affairs ceases.

Should an individual become incapacitated without having executed an EPA, their next of kin would have to be appointed their receiver by the court to be able to handle their personal and business affairs. Under a Receivership Order, accounts must be filed with the Registrar of the Supreme Court on an annual basis, or more frequently if the court considers it prudent to do so.

An EPA tends to be a more secure arrangement than the holding of a joint bank account, where abuse may go undetected, or where the terms of one’s Will may not be carried out with respect to the devolution of assets in a joint bank account following death.

For the reasons highlighted in recent articles surrounding the exploitation of vulnerable seniors, it is extremely important that donors carefully select donees who they trust will be responsible concerning the handling of their personal and financial affairs in the event they become unable to do so themselves.

For their part, donees should document all decisions and transactions regarding the donor’s personal and business affairs to ensure that they can provide sufficient evidence that their actions were in the best interest of the donor. Donees are also advised to hold quarterly or biannual meetings with family members of the donor to provide accounts of the donor’s personal and business affairs, so that any concerns/issues of financial and/or physical abuse can be addressed immediately, particularly among our vulnerable and elderly community.

Everyone should be mindful that, even if an individual is exercising their powers through an EPA, any suspicions of financial and/or physical abuse of a vulnerable senior can be filed with the Government’s Ageing and Disability Services, in accordance with the Senior Abuse Register Act 2008. That office is empowered to conduct the necessary investigations to ensure that such abuse of power is addressed appropriately.

Type

Insight

Locations

Bermuda

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