Managing Property and Affairs of the Mentally Incapacitated

Managing Property and Affairs of the Mentally Incapacitated

Managing Property and Affairs of the Mentally Incapacitated 500 667 Alfred Ip

Caring for aged loved ones often imposes a heavy burdens on friends and family. The burden increases significantly if the loved one becomes mentally incapacitated. Incapacitation can come on slowly over months or years. Certain traumatic events can, however, cause mental incapacity in an instant. In every case it will fall to close friends or family to take the necessary steps to protect their best interests and manage their assets.

A day that you hope will never happen

Mental incapacity can take many forms and arise from numerous, often unpredictable, circumstances including traumatic accidents, strokes or, very often, simply due to ageing – taking the form of dementia or Alzheimer’s. In all circumstances the result is that sooner or later the person is no longer able to take care of their personal affairs.

The definition of “mentally incapacitated person” is a person who is incapable or managing or administering his or her property and affairs. Sometimes mental incapacity is immediately apparent, especially to family members. While other times mental incapacity may not be immediately noticeable and may worsen with time.

For many Hong Kong is part of globalised world, where work and travel overseas and peripatetic employment is the norm. In such circumstances, identifying mental incapacity in loved ones becomes increasingly problematic when the person does not live in the same household, city or even country as other family members.

Increasing average lifespans also adds new burdens to families and the elderly, especially those who live in special elderly-care facilities.

Some of our clients have faced situations where mentally vulnerable loved ones have been taken advantage of or manipulated by others into giving away their assets, which in extreme situations have led to bitter disputes involving costly and lengthy litigation. To avoid such unpleasant occurrences, it’s best to properly plan this eventuality and protect your loved ones’ finances and interests accordingly.

Legal guardianship

The first step would be to determine if there is an Enduring Power of Attorney in place or an existing Representation Agreement which appoints a representative to manage personal affairs. Absent these, it might be necessary to apply under the Mental Health Ordinance (Cap. 136) to the Guardianship Board to be appointed as a legal guardian or to apply to the High Court for legal guardianship – known as “Committee” – to make decisions on behalf of the mentally incapacitated person and protect his/her best interest.

Appointment under the Guardianship Board is generally for the purpose of managing the incapacitated persons personal wellbeing. Appointment as a Committee by the High Court is for the purpose of managing financial assets. The maximum monthly amount authorised by the Guardianship Board is currently up to HK$17,000 a month. Therefore, If the person only has deposits with financial institutions and has been living modestly, a guardianship order could be a better solution to the appointment of a Committee.

In case there is no family or friend who wishes to become the appointed legal guardian, the Guardianship Board can appoint the Social Welfare Director to be the public guardian. In extreme and/or dangerous situations or in case of maltreatment and/or exploitation, the board has the power to issue an emergency guardianship order.

Powers of a Committee

Appointing a Committee is a crucial decision since it takes away an individual’s decision-making capacity and passing it to someone else. Before the Court makes such a decision, it needs to consider and satisfy itself of three important factors. First, if there is real incapacity and whether or not it is full or partial.

Once satisfied, the court will need to consider who is/are the best to be appointed as a Committee – which can comprise one or more individuals. The Committee remains, at all times, subject to the supervision of the Court.

A Committee has wide ranging financial powers over the incapacitated person’s assets and is able to make various critical decisions – e.g. selling properties, stocks and other investments. The Committee can also make decisions and draw funds from the estate so that the incapacitated and his/her dependents can maintain their lifestyle.

Mental capacity is an incredibly complicated matter – and what we’ve discussed is only the tip of the iceberg! For further advice about this issue, get in touch with our team of solicitors.

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.

Alfred Ip

Alfred Ip

Alfred assists high net-worth individuals (HNWIs) in handling their wealth-related issues, such as contentious and non-contentious trust and probate, mental capacity, family office, amongst other wealth management matters. He is also a leading Dispute Resolution lawyer with over 20 years of experience in Hong Kong. Moreover, Alfred helps clients with issues regarding Family Law.

All articles by : Alfred Ip
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