Assisted Decision-Making – Dementia, Incapacity and Power of Attorney

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Life is about making decisions. We make decisions all the time regarding where we live, work, how we take care of ourselves, where our children go to school, etc. Making our own decisions and exercising our choice is one way to express our individuality and exert control over our lives. Naturally, contractual affairs also form part of our daily decision-making process.

Our capacity to enter into legal contracts is closely tied to our mental state. For a transaction to be regarded as valid, the law requires that the relevant person can understand the nature and consequences of that transaction. We take it for granted that adults can make decisions about their welfare or financial matters. Unfortunately, some people are not in a sufficient mental state to make legal decisions, whether due to old age, dementia, disease, a stroke or similar.

However, in establishing and protecting their appropriate autonomy, the individual must be protected against abuse and exploitation. In South Africa, the law deals with this by using Curatorship, which has been criticised by some quarters for the many frustrations it causes.

An individual can appoint another person to act on his or her behalf through a Power of Attorney. However, should the person who granted the Power of Attorney become incapacitated, this power terminates – which is highly illogical. Obviously, this is a significant issue for caregivers, as it is common for ageing parents to appoint someone reliable as their Power of Attorney. In light of this the SA Law Reform Commission is currently investigating assisted decision-making, but this still has a way to go before anything concrete transpires.

Under the above-mentioned circumstances where the Power of Attorney falls away in the case of incapacity, it is essential to note that, if the agent acting on behalf of an individual does not cease to act on their behalf, then they are in fact acting without authority and risk personal liability.

In terms of Rule 57 of the High Court’s Uniformed Rules, in situations where an individual loses the ability to manage their affairs, the High Court can appoint a Curator Bonis to handle that individual’s financial matters. The Curator Bonis administers the estate of the individual according to the Court’s powers and functions, and they are ultimately accountable to the Master of the High Court. A Curator Bonis is allowed remuneration for their services. Accordingly, they are entitled to a maximum annual fee of 6% on the gross income generated from the assets and a once-off payment of 2% of the capital on the date the curatorship ends.

The appointment of a Curator Bonis is relatively expensive as it involves a High Court application with costs in the region of R60 000 to R80 000. The process itself is also rather arduous as well as taxing on the Curator. The Curator is required to submit annual accounts detailing all income received, expenditure incurred and provide all vouchers and receipts for transactions made for or on behalf of the incapacitated person. Unfortunately, as previously mentioned, many frustrations surround this appointment in terms of it being both costly and the innumerable delays caused by red tape.

A cheaper alternative involves the appointment of an Administrator by the Master of the High Court in terms of The Mental Health Care Act, 17 of 2002. This Administrator may only deal with the individual’s property and not their personal affairs. Also, it is only feasible in the case of mental illness or intellectual disability – and only for smaller estates with assets valued up to R200,000, with an annual income of up to R24,000. The diagnosis of a mental illness or significant intellectual disability will have to be confirmed by medical certificates or reports from a certified mental health care practitioner.

Since no High Court application is required for an Administrator’s appointment, the procedure is far less costly than a Curator Bonis appointment. This is because the applicant does not need to work through an Attorney, and the application fees charged by the Master in processing the application amount to no more than R2500. Administrators, like Curators, are governed by the Administration of Estates Act and are also entitled to their fee of 6% on income from assets and of 2% of the value of the capital when the administration is terminated.

In summary, the powers granted to a Curator Bonis or Administrator are primarily to administer the estate of the person who is incapable of managing their affairs and generally include the following:

  • To receive, take care of, control and administer all the assets.
  • To carry on/or discontinue, subject to any law which may be applicable any trade, business or undertaking.
  • To acquire, whether by purchase or otherwise, any property, movable or immovable, for the benefit of the estate.
  • To apply any money for the maintenance, support or towards the benefit of the person; to invest or re-invest any funds etc.

Once the individual dies, the curatorship or administration terminates, and the management of the personal and financial affairs are then handed over to the Executor of the deceased’s estate.

An alternative to the above is to consider setting up a trust to manage the individual’s financial aspects – obviously this needs to be performed while that individual still has legal capacity. However, trusts involve certain costs and taxes, as well as other implications. A recommendation was made to the SA Law Reform Commission in 2004 to consider an enduring or conditional Power of Attorney. However, nothing further has resulted.

In general, majors are presumed mentally and legally competent to manage their affairs until proven otherwise. When a person becomes incapable of managing their affairs, especially the administration of his or her estate, it is imperative that someone is legally appointed to assist that person who has become incapable, as a general or special power of attorney will not be valid. In terms of South Africa’s current legal system, no person may manage another person’s affairs without the required authority to do so.

AED Attorneys has the knowledge and experience to navigate these difficult situations. After making an appointment with them, they skilfully guide their clients through the various options available and explore the most suitable one for each individual’s unique requirements.

AED Attorneys understand that every situation is unique. Although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

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