Understanding power of attorney in SA: Managing mental incapacity, legal challenges
By James Carvalho, Director and Financial Planning Specialist at Chartered Wealth Solutions
As our population ages, more and more families find themselves grappling with the complexities of caring for elderly parents. This often includes managing their financial and legal affairs, which can be a daunting task. For many, the intricacies of power of attorney (POA) can add to the stress. Understanding the legal framework and practical steps involved in establishing and managing a POA is crucial for ensuring the affairs of ageing parents are handled smoothly and effectively.
POA is an important legal instrument that allows one person (the principal) to appoint another (the agent) to act on their behalf. In South Africa, this document is essential for managing various affairs, especially when the principal is unable to do so themselves. However, the principal must be of sound mind when granting a POA, and the situation becomes complex if they are later declared mentally incapacitated.
Unlike some other jurisdictions, South African law does not currently recognise an enduring power of attorney (EPA). Despite recommendations from the South African Law Reform Commission to introduce this concept, it has not been incorporated into the legal framework. This means that once a person is declared mentally incapacitated, the power of attorney automatically lapses.
For a POA to be valid in South Africa, it must meet several requirements:
- The POA must be in writing.
- It should clearly outline the powers granted to the agent.
- The principal must sign the document.
- The principal must be of sound mind when granting the POA.
Banks require a separate, in-person process for granting POA for banking purposes due to financial safeguards.
The requirement for the principal to be of sound mind is critical. It ensures that the principal fully understands the implications of granting a POA and can make informed decisions. Mental capacity is a safeguard against potential abuse and ensures that the principal’s best interests are protected.
In South Africa, a POA automatically terminates if the principal becomes mentally incapacitated. This poses significant challenges, especially if the principal’s affairs need ongoing management. Here are the steps and legal processes involved:
1. A general POA ceases to be valid once the principal is declared mentally incapacitated, which must be determined by a registered physician."
2. Under the Mental Health Care Act, the Master of the High Court can appoint an administrator to manage the property of an incapacitated person. This process is typically less costly than appointing a curator bonis and is usually granted to a family member. For this appointment to proceed, the court will assign an investigator.
3. The High Court can appoint a curator bonis, a professional responsible for managing the financial affairs of an incapacitated person. This process requires a court application and is generally used when there is no family nearby or willing to take on the role.
Practical tips for managing affairs while applying for administration
1. Ensure you have access to important passwords and login details for online banking, e-mail and other essential services so you can continue paying necessary expenses while applying for administration.
2. Maintain the principal’s cellphone service to receive important notifications, verification codes for online transactions, banking alerts and one-time passwords (OTPs).
3. Ensure you keep accurate records of all banking transactions for the investigator.
Managing the affairs of a mentally incapacitated person in South Africa requires careful planning and legal guidance. While the lack of an enduring power of attorney adds complexity, understanding the available legal options and practical steps can help ensure that the principal’s affairs are managed effectively. Consulting with legal professionals is crucial to navigate the legal processes and ensure compliance with South African laws.
By being proactive and prepared, you can better manage the challenges that come with mental incapacity and ensure that your loved one’s affairs are in good hands.