Most people accept that death is an inevitable part of the cycle of life and plan their succession accordingly. However, most people do not envision the possibility of them ever becoming mentally incapacitated.
Although our team at Hugill & Ip are firm believers that everyone should have a Will, a Will does not help when it comes to mental incapacity because it only takes effect upon death. With modern technology and medical advances prolonging the lifespan of human beings, mental incapacity (due to aging, a stroke, or an accident) is a real risk that needs to be addressed.
Why Get an EPOA?
When one’s mental state falls within the legal definition of mental disorder, then his decision over his financial affairs can no longer be valid in the eyes of the law. Therefore, his family would need to take extensive steps to deal with his assets by making an application to the Court. However, if he had executed an enduring power of attorney (“EPOA”) during the time when he was mentally sound, such EPOA would be helpful and useful in this critical and unforeseen situation.
An EPOA is a legal document that allows a person to appoint one or more of his attorneys to step into his shoes in managing his financial affairs in the event he becomes mentally incapable. The person who wishes to establish the EPOA and give his power to his attorney(s) is called the donor. Unlike a normal power of attorney that will cease to have effect as soon as its donor becomes mentally incapacitated, the EPOA will continue to be in effect and only ceases to be effective when the donor dies. An EPOA is particularly helpful for someone who needs to constantly operate his account(s) or who has financial dependants. If given the power in the EPOA, an attorney can even sell or lease the donor’s landed properties on the donor’s behalf.
We almost always advise donors to include a restriction in the EPOA that the attorney must not act on his behalf until the attorney has reason to believe that donor is becoming mentally incapable. The attorney must then apply to the Registrar of the High Court to register the EPOA. Registration will allow the attorney to make decisions for the donor after the donor has become mentally incapable. This means that a register of every EPOA in force is kept with the Court, which is open for public inspection. The intention behind this system is that the attorney’s activities can be monitored. To give the donor additional comfort, the donor can state in the EPOA that he and other trusted persons must be notified before the attorney brings the EPOA to Court for registration.
In Hong Kong, if there is no EPOA in place, a family member can make an application under Part II of the Mental Health Ordinance (Cap.136) to have the family members or professionals be appointed as the committee to handle the financial affairs of the mentally incapacitated person. The costs for such application are definitely higher than putting in place a proper and valid EPOA at the outset. For large families or families with estranged members, it is very likely that one or more family members would fight over as to who should be appointed as the committee. In the meantime, the interests of the mentally incapacitated person may be jeopardized.
In summary, having a proper EPOA entails three important benefits:
- Ensure only your most trusted or the most capable persons are appointed to act on your behalf in the event of mental incapacity so that your financial affairs/obligations can continue as usual;
- Make life easier for your loved ones so that they do not need to make a separate complicated application to Court; and
- Reduce costs and the possibility of family discord in the event of mental incapacity.
Why You May Need Our Help?
An EPOA is not a document you can make at home. In order for the EPOA to be valid, a medical practitioner and a legal practitioner will have to act as witnesses to certify the mental state of the donor when he executes the EPOA. Not all medical practitioners are willing to sign their name on the EPOA so we can help book appointments with medical practitioners who specialize in this area. Also, execution of the EPOA can be tricky and a mistake can be fatal to the validity of the EPOA.
It is important that one gets proper legal advice when preparing the EPOA so that the donor fully appreciates the extent of the powers of the attorney(s) before considering who would be suitable to act as his attorney(s). Based on how the form is worded, the EPOA can give the attorney(s) wide or more restricted powers. We have had clients who only gave their attorneys authority to deal with a particular account or particular piece of property. However, since the EPOA needs to be registered and hence, available for public search, other clients rather not put their financial details in the form. Ultimately, this is a balancing exercise between a donor’s different needs. It is also important to decide whether there should be more than one attorney and if more than one, whether the attorneys should act jointly or jointly and severally. Again, this is a balancing exercise that the donor needs to conduct after getting some proper legal advice.
Nothing is Perfect…
Worth noting is that a Hong Kong EPOA will not be able to empower the attorney to handle the donor’s assets outside of Hong Kong due to its jurisdictional nature. Hence, if you have assets elsewhere, you might want to consider having another EPOA or similar legal instrument recognized in those jurisdictions.
Moreover, the Hong Kong EPOA only deals with the donor’s financial affairs, and not, for example, medical directives. In July 2009, the Law Reform Commission published a consultation paper seeking the public’s views on proposals to extend the scope of an EPOA to include decisions as to the donor’s personal care, and in July 2011, a report was issued. The Department of Justice stated that subject to the result of the consultation, it is planned that proposed legislation will be introduced into LegCo in the 2018/19 legislative session. It has yet to be seen how this may impact the current regime so do stay tuned for any updates.
Our team at Hugill & Ip has extensive experience in dealing with Hong Kong’s complicated testamentary, probate and inheritance laws – so if you need further advice on these subject, get in touch with us to find out how we can help.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
