Laura du Preez | 18 September 2024
Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses.
Legislation that could assist a rapidly growing number of South African families deal with relatives living with dementia who have lost the mental capacity to manage their finances is missing in parliament.
Johann Jacobs, a consultant in legal firm Cliffe Dekker Hofmeyr’s trusts and estates practice, told the recent annual Fiduciary Institute of Southern Africa conference, that the South African Law Commission had found that South Africa was in “dire need” of legislative reforms to assist the elderly and other people who lose the capacity to act for themselves.
In 2019 it proposed the introduction of the Supported Decision Making Bill, which among other things introduces an enduring power of attorney.
But if the law commission’s research project and proposed bill was a flight, it would have to be “reported missing”, Jacobs said.
He said South Africa has been left far behind other jurisdictions and alternative ways of managing the estate of someone who has lost mental capacity are inadequate or costly.
Currently, you can only grant either a general or specific power of attorney giving someone the right to act on your behalf as long as you have the mental capacity to give that power. As soon as a person loses their mental capacity to grant a power of attorney, the agent's authority to act lapses.
Many families “busk it” as best they can with informal arrangements, but both the elderly and their families are vulnerable to being challenged legally, Jacobs said.
Informal arrangements can work when families are functional, but there are often family feuds or simmering dysfunctional relationships in which elderly parents are used as the armoury, Jacobs said.
When financial institutions ask for Financial Intelligence Centre Act (FICA) documents for an elderly person, there can be problems, making it difficult to manage investments and bank accounts. Money can be stolen and tax issues can also arise, he said.
There is no certainty when parliament will deal with the bill, but what is certain is that there are the growing number of people who it could help, Jacobs said.
Dr Ryan Fuller, a specialist psycho-geriatrician at Akeso’s Memory Clinic in Gauteng, told the FISA conference that six percent of people over the age of 65 have dementia and the prevalence doubles every five years thereafter. This means that at age 85, one out of every two people have dementia, Fuller said.
The symptoms include loss of memory, difficulty finding the right word, difficulty understanding what people are saying, difficulty performing a previously routine task, and personality and mood changes, he said.
Challenging behavioural conditions such as depression, anxiety, paranoia and hallucinations, aggression and sexual inhibition occur in about 50 percent of case, he said.
The key to determining whether someone with dementia has legal capacity is the severity of the disease and whether it impairs immediate short-term memory, insight, judgment and decision-making skills, he said.
The cost of caring for someone with dementia is high and so much of it is done informally, Fuller said.
The annual global cost of dementia in 2019 was estimated to be above US$1.3 trillion and 50 percent of this cost is related to informal care. Informal carers work an estimated 133 billion hours a year or the equivalent of 67 million full time workers, he said.
Jacobs said once dementia has claimed an elderly person’s capacity to appreciate their actions, the only other legal options to manage their affairs are:
In both cases these professionals can charge up to six percent of the incapacitated person’s income and up to two percent of the assets in the estate.
If the persons income is more than R24 000 a year (R2 000 a month) or their assets more than R200 000, the Masters Office must appoint an investigator to identify their assets. This also comes at a cost.
“How ridiculous are these numbers that were set in 2004 and have not increased since,” Jacobs said. The R24 000 a year should be R240 000 and the R200 000 should be R2 million, he said.
Jacobs said the bill proposed by the Law Commission after extensive research was a good solution.
The bill is principle-based, unlike the paternalistic appointment of a curator, and recognises that some incapacitated people just need some assistance making decisions while others need their financial affairs and personal care managed fully on their behalf, he said.
The bill provides for both the appointment of a financial supporter and personal supporter.
The bill suggests that the incapacitated persons circumstances, cultural environment, past and present wishes, as well as the input of their spouse, carer and other lay people caring for them be taken into account when decisions are made for them, Jacobs said.
Oliver Phipps, a partner at UK-based law firm Lester Aldridge, with experience of the UK’s lasting powers of attorney, said applications to court for a curator are not only expensive but take time.
Powers of attorney empower people to make their own decisions about the future affairs and does not burden the state with this role, he said.
Phipps says enduring powers of attorney are at times abused but safeguards can be put in place.
In the UK, while you still have mental capacity, you can set up a lasting power of attorney for your property and wealth and/or for your health and welfare. This power can become effective only on loss of mental capacity. You can stipulate that mental incapacity must be proven by way of medical reports, he said.
An impartial person who has known you for at least two years needs to provide certificate confirming that you understand what you are doing in granting the power of attorney, that no one has forced you to grant it, and that there is no fraud involved or any other reason for concern, Phipps says.
In a lasting power of attorney signed in the UK, you can also list up to five people you want to have notified when the document is lodged with the Office of the Public Guardian and when actions are taken on your accounts.
Phipps says problems are arising increasingly when an incapacitated person has bank accounts or investments in another country that are required to fund their care.
Getting an enduring power of attorney recognised in another country requires a costly and time-consuming court application in that country, he said.
Phipps says since 2009 signatories to the Hague Convention on the Protection of Adults agree to recognise legislation protecting adults in countries where they habitually reside. This gives people the ability to use powers of attorney granted in their home country to perform financial transactions in countries that are signatories to the convention. The European Union is considering obliging its members to adopt the convention, he said.
Should South Africa adopt an enduring power of attorney, this could then also be recognised in countries that are signatories to the Hague Convention, Phipps said.
