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Our clients often enquire about a Lasting/Enduring Power of Attorney. Unfortunately, that route is not available in South Africa. It is therefore important to understand and know that once a person can no longer manage his or her affairs or pass away, any existing power of attorney is then no longer valid.

Essentially, this legal framework of a Power of Attorney, allows one, as a so-called principal, to grant an agent the authority to act on one’s behalf. The power of attorney can either be general or specific.

A general power of attorney permits the agent to do anything the principal could do if he or she were present. This is typically why one would appoint an agent—to handle matters one could not attend to oneself.

On the other hand, a specific/special power of attorney is limited to particular circumstances or acts that the principal cannot undertake and the agent’s powers are clearly defined and restricted to the tasks at hand. For instance, if I am travelling and I need someone to take care of business whilst I am away. The Special power of attorney will then authorise the agent to attend to a specific task on my behalf.

In many countries, there is a provision for a so-called enduring power of attorney, which remains valid even if the principal loses mental capacity or dies. Unfortunately, South African law does not recognise enduring power of attorney, because our common law requires that the principal must always be able to withdraw the power of attorney. If the principal loses mental capacity, he or she can no longer withdraw this authority, causing the power of attorney to lapse. Most people are not aware of this and this is where we at Alcock and Associates Inc can assist.

This legal gap poses significant challenges, particularly with our aging population, where many individuals eventually lose the capacity to manage their affairs due to conditions like dementia or Alzheimer’s disease.

The only two legal alternatives are to apply to the High Court for the appointment of a curator. This process can be quite costly, running into tens of thousands of rands. If opposed, the costs can be unpredictable and substantially higher. However, if the estate of the individual is substantial, this is the best route to follow. Annaliese Lubowski specialises in this field of the law and can assist every step of the way.

The second option falls under the Mental Health Care Act of 2002. This legislation allows for the appointment of an administrator by the Master of the High Court. However, this process also has its drawbacks due to the complete inefficiency at the Master Offices counrtywide due to administrative backlogs.

Proactive Measures for Clients
In the absence of enduring powers of attorney, there are proactive steps that we can recommend to clients. One viable option is to set up a trust to manage finances. If a client is in the early stages of a condition like Alzheimer’s disease but still compos mentis, he or she can establish a trust and donate property to it. The trust can be structured to benefit only the client during his or her lifetime, with the capital passing to the heirs upon death.

From a tax perspective, the South African Revenue Service (SARS) supports this arrangement. Donations to the trust can be made free from donations tax under section 56 of the Income Tax Act. However, the property will be included in the deceased estate for estate duty purposes, ensuring compliance with tax legislation. We at Aalcock & Associates Inc can indeed assist in this regard as well.

Source: Adapted from an article by FISA – CEO Mr van Vuren

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