If you become incapable of making decisions, or of communicating decisions, who will do this for you?
The cheapest answer is to appoint an ‘attorney’ beforehand, by a document known as an ‘enduring power of attorney’ (‘EPA’).
You do not have to be ‘old’. Young people have car crashes and other experiences that can leave them alive but mentally incapable. A well-drafted EPA can last a lifetime if it includes appropriate successor attorneys; although usually EPAs should be reviewed when you review your will.
There are two types of EPA: (a) for property; (b) for personal care and welfare.
An EPA for personal care and welfare does not come into effect until you lose mental capacity. It may never be needed; but it’s too late if you wait until the need arises. (Then, instead of an EPA, someone will have to apply to the Family Court for an order appointing a welfare guardian. That is more complicated and expensive and also involves regular reviews.)
An EPA for property comes into effect whenever you choose. If you lose mental capacity before making an EPA, someone will have to apply to the Family Court for an order appointing one or more property managers. That is more complicated and expensive and requires formal accounts to be prepared and regular reviews.
You can revoke (cancel) or suspend the appointment of an ‘attorney’. If you do, you must given written notice to the attorney.
You can appoint anyone to act as your ‘attorney’, as long as they are over 20, not bankrupt, and not mentally incapable themselves. You can also appoint one or more ‘successor’ attorneys, who become your attorney if the first-named attorney cannot act.
People often appoint (a) their spouse; (b) if there is no spouse, or as a ‘successor attorney’, an adult child. In many families, that can create avoidable issues.
Family conflict can arise if other family members mistrust the appointed ‘attorney’, or indeed if the appointed ‘attorney’ abuses the trust that has been placed in them.
Your preferred attorney may also be doubtful whether they want sole responsibility.
You can reduce such issues by (a) including a clause requiring the attorney to consult another named person before making decisions; and/or (b) requiring the attorney to provide information to a named person (‘supervisor’). These options are available on the standard forms. The named person is not required to sign the EPA; however, it is wise to obtain written confirmation of their willingness to perform this role.
Information. Option (b) (a ‘supervisor’ – to whom the attorney must provide information) requires you to specify in the EPA what information must be provided, and when. For an EPA (personal care and welfare), examples could include: ‘Two-monthly email updates on donor’s circumstances’; or ‘information about decisions about residential care’; or ‘copies of medical notes within 48 hours of medical attention’. For an EPA (property), examples could include: ‘Monthly bank statements’; or ‘Within 48 hours, details about any financial transaction exceeding $200’; or ‘Statements and management reports from donor’s investments.’ For any EPA, there could also be a general clause: ‘Any other information as requested, within 7 days of request.’
The ‘attorney’ can then rely on the other named person to act as a visible check on the attorney’s decisions. The other person can potentially raise early concerns with other family members or the Family Court if the attorney exceeds their authority or abuses their position and will not correct their error. They can also answer speculative but unfounded concerns raised by other family members.
Keep records. For this to work, there needs to be an accessible record of the attorney consulting or informing the other person. Therefore the attorney should keep a ‘paper trail’ (or at least an email trail), to prove that everything has been above board. Keep a paper file or electronic file of decisions made and the communications about them.
Resisting challenges. A disgruntled relative may still try to challenge the attorney’s actions; but they will need solid grounds, and they risk having to pay the attorney’s costs of defending any such challenge. It will be much easier to resist any such challenge if two people are involved when decisions are made, and if the decisions are systematically and accurately recorded.
For property matters only (not available for a personal-care-and-welfare EPA), another option is to appoint two concurrent attorneys, and require them to act jointly. You can still also include consultation and/or supervision requirements as well.
Depending on your circumstances, you may want to include professionals such as lawyers or accountants as attorneys, consultants, or supervisors. This will incur ongoing fees. In many circumstances it is not necessary.
However, an independent professional legal adviser is required when you first make the EPA: to advise you about the EPA, witness your signature, and certify to their belief that you are acting voluntarily and with full understanding of the EPA. This is a legal requirement, put in place by Parliament. That adviser must be a lawyer, qualified legal executive, or representative of a trustee corporation.
Resources about EPAs:
EPA – Property (new form March 2017)
EPA – Personal care and welfare (new form March 2017)
Remember – although you may download these forms and complete them yourself, they are not legally valid unless they are witnessed and certified by a professional legal adviser. You may reduce your legal fees by downloading and completing these yourself before you meet with the legal adviser. Ask your legal adviser about this.
At Kiwilaw you will pay less if you download and complete the forms yourself, as long as they are clear and legible.
26 October 2017