Clients frequently ask us whether they should sign a Power of Attorney (“POA”). There are some very real implications to signing over a POA, so it is important to have an understanding of the legal consequences as well as the circumstances in which a POA can be used. Used in the correct way it can be a very helpful and practical document. Before signing over a POA, consider the following factors.

A POA is essentially a notice that gives a third party the permission to act on your behalf and make decisions for you. This can be for specific matters (‘special power of attorney’) or for all matters (‘general power of attorney’). Careful consideration should be given to the person you are granting a power of attorney, as you are giving them the authority to act in your stead.

The most common instance where power of attorney is signed over is with the elderly. There may come a time when a person is too frail to physically sign documents or is physically not able to visit the bank. A POA can prove very helpful in these circumstances to relieve some of the stress on the elderly and their family.

In South Africa, there has been an increase in power of attorney being signed over from people emigrating from the country. Often people find themselves in a position when they have left the country before all of their financial matters are completely finalised. In this instance, they would sign over authority to someone still in South Africa to assist with these matters without documents needing to be sent back and forth.

COVID has presented another example of where a POA can be useful. For the elderly or those with a co-morbidity who are encouraged to self-isolate, a POA allows you to delegate authority to a trusted person, meaning one can limit their contact with people outside of their home.

It is important to remember, however, that under South African law it is not possible to sign over power of attorney if someone becomes mentally incapacitated. When a person is no longer able to conduct their affairs due to mental impairment, a POA ceases to be valid. If someone acts on an invalid power of attorney, it can be considered fraud.

It would also be reckless to accept an instruction from an agent acting by virtue of a POA where one knows the POA to no longer be valid due to the person granting the POA being mentally incapacitated.

So what can one do when someone is mentally unable to deal with their own affairs, and POA is not an option? There are two options:

• One can apply to the High Court to be appointed as the curator of the incapacitated person’s affairs.
• One can apply to be appointed as the administrator of such person through the Mental Health Act.

A very important consideration is that when a curator or administrator is appointed for someone who is mentally incapacitated, the power conferred is absolute. This means that the person who becomes the curator has full power under the law to conduct the affairs of the incapacitated person indefinitely and as they deem fit. In contrast, a POA can be revoked or withdrawn at any point.

The above sets out the law as it currently stands in South Africa. Please contact your financial planner if you would like to discuss putting a POA in place. If you are concerned that a loved one may be showing signs of dementia, it may be time to start looking into some of the options discussed. The legal avenues available all take time to put in place, and it may become stressful when you are not able to deal with the assets of the mentally incapacitated person as the correct legal procedures are not in place.