Legal update: Why appoint an Enduring Power of Attorney?21Jun2016
Individuals can make arrangements to appoint other persons responsible in the event that a loss of mental capacity causes an inability to manage his or her own financial affairs such as in the case of dementia. A document known as Enduring Power of Attorney (“EPOA”) serves this purpose.
An EPOA is not to be confused with the document known as a power of attorney which confers general or specific powers to carry out arrangements on behalf of individuals who have mental capacity in circumstances where such individuals are unavailable or unable to attend to certain matters. A typical example is a power of attorney authorising a person to execute documents in a corporate transaction where he is overseas. Such power of attorney automatically becomes ineffective when the person conferring the power loses mental capacity.
An EPOA is made at a time when the donor of powers has mental capacity to manage his own financial affairs and this document would remain effective in the event that the donor subsequently loses mental capacity. To be able to use the EPOA, for example, after the donor loses mental capacity, the attorney is required to register the document with the High Court. The donor could require that the attorney gives notice to named persons before he registers the EPOA.
In the EPOA, the donor typically arranges as follows:
- appoint more than one attorney so that the attorneys may assist or monitor each other;
- place restrictions on the authority of the attorney(s);
- specify a date for an EPOA’s commencement or an event to trigger its commencement;
- nominate person(s) to be notified by the attorney before applying to the High Court for the registration of the EPOA.
The EPOA must be made in such form as prescribed by the Enduring Powers of Attorney (Prescribed Form) Regulation (Cap. 501A of the Laws of Hong Kong). It is mandatory that the donor makes the EPOA before a registered medical practitioner and a solicitor. The attorneys must be at least 18 years old, mentally capable and not a bankrupt. A trust corporation can also be an attorney.
A donor can revoke the EPOA whilst he is mentally capable or after recovery from mental incapacity. If the EPOA has been registered with the High Court, a court application to revoke the EPOA would be required. An EPOA would be revoked automatically when the attorney passes away or becomes bankrupt.
A simple example is this: Peter makes an EPOA appointing his son to deal with his financial affairs if ever he loses mental capacity. Whilst Peter is mentally able, he knows where and how he could draw funds from his bank accounts. He is able to invest his money, pay his own bills and live normally. One day, Peter loses mental capacity and can no longer recognise himself, his family or understand any meaning or values. He has special medical needs and needs to be hospitalised. To settle the medical bills, Peter’s son needs to convert some of Peter’s stock portfolio into cash. In order for Peter’s son’s instructions to be authorised by the bank, the son is required to produce a registered EPOA.
In light of the ageing population and an increasing number of dementia cases in Hong Kong, the EPOA is of particular importance. To further understand this process, please contact:
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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.