A multimillionaire lies in the hospital bed, she has a critical illness policy which can be claimed, but her sibling has to borrow money just to pay her medical bills and daily expenses. Why? Vincent Lim, ChFC®️/S, AEPP®️, an active Insurance and Financial Practitioners Association of Singapore (IFPAS) member, shares the importance of Lasting Power of Attorney (LPA) in this article.
She lies in the hospital, her face contorted.
“Who are you?”
She said to her brothers, not recognising them at all.
She is single, in her late 50s, unmarried, a multimillionaire, and both their parents have passed on. And she has totally lost her mental capacity due to stroke. This was the situation of my client’s sister.
Sharon (not her real name) suffered from stroke and was hospitalised. She bought a critical illness policy which can be claimed but her sibling has to borrow money just to pay for her medical bills and daily expenses. Though she is a millionaire, nobody has the legal rights to help her with all the financial transactions. This has a disconsolate but familiar ring, where it is said that water is everywhere but not a drop to drink.
Last year, there were 478 mental capacity act applications and most of them were for the appointment of
deputyship to deal with the loss of mental capacity.
Based on the statistics on 1 April 2015 to 31 March 2016, the leading cause of loss of mental capacity is dementia and neurological disorder.
What can trigger loss of mental capacity?
- Brain injury due to accident or illness
- Mental health problems
- Intellectual disabilities
What is Lasting Power of Attorney (LPA)?
LPA is a legal document that allows a person who is at least 21 years old to voluntarily appoint one or more persons (donees(s)) to make decisions and act on his behalf if he loses his mental capacity. A donee can be appointed to act in two broad areas, namely, personal welfare, and property and affairs matters.
Benefits of a Lasting Power of Attorney (LPA)
An LPA enables a person (donor) to make a personal choice and decision on selecting a trusted decision-maker (donee(s)) who is reliable and competent to act in his/her best interest when he/she loses mental capacity one day.
It also relieves the stress of having to apply for deputyship when the person loses mental capacity without an LPA in order. It is stressful because applying for deputyship can take 3-4 months or even longer especially when there are disputes in the family, on who should be the deputy.
In the meantime, in some complex or difficult circumstances, the family member may have to scramble to borrow money, in order to pay for the bills incurred by the donor.
Types of Lasting Power of Attorney (LPA)
There are two types of LPA:
1) LPA Form 1 – Standard version that donors use to grant donees general powers with basic restrictions.
2) LPA Form 2 – For donors who wish to grant donees customised powers. LPA Form 2 has to be drafted by a lawyer.
What are the decision powers to grant your donee(s)?
1. Personal welfare:
- For example, deciding on where the donor is going to stay;
- Deciding who the donor may have contact with, deciding day to day care decisions like what to wear and to eat;
- Handling the donor’s personal correspondence;
- Giving or refusing consent to the carrying out or continuation of a treatment (including the conduct of a clinical trial) by a person providing health care for the patient if and only if the donor expressly states this in the LPA.
2. Property and affairs:
- Dealing with property – buying, selling, renting and mortgaging property;
- Opening, closing and operating bank accounts;
- Receiving dividends, income, inheritance benefits and other financial entitlement on behalf of the donor;
- Handling tax matters;
- Paying the rent, mortgage repayments and household expenses;
- Investing the donor’s savings; and
- Purchasing a vehicle or other equipment the donor needs.
3. or Both
As a best practice in advising your client, always have a substitute donee(s) or a licensed trust company under the Trust Companies Act (Cap.336), as prescribed by the mental capacity regulations just in case the first donee formally refuses the appointment to the public guardian office or pass away in a common disaster with donor or becomes bankrupt.
What happens when you don’t have a Lasting Power of Attorney (LPA)?
- No one will be authorised to make medical decisions and personal welfare decisions on the donor’s behalf that is in his/her best interest.
- Property and affairs will be in a gridlock where the donor might have money but no one has power to assess it to take care of the donor’s personal welfare.
- The next of kin of the donor will have to apply to the family court for deputyship which will take 3-4 months or even longer.
Deputyship and its implication
The family court has simplified the process of applying for deputyship.
However, for someone who has long term permanent mental incapacity, there is a high chance of outliving the existing resources. Hence, investing it might be necessary to stretch the existing resources.
However, in the decision by Colin Tan DJ in RE TQR  SGFC98 (5), the court made several observations and pointers on deputies’ power to make investment. In the event that P’s (person that is alleged to lack mental capacity) investments fall in value by more than 30%, the deputies would be personally responsible to P for the loss and would reimburse P for the loss sustained.
The job of financial planners is an integral one. As we have an ageing population, the incidence of age-related issues will increase over time. Whilst financial planners might have astutely done the work of wealth accumulation and preservation, the distribution portion of the financial plan is equally important.
Hence, I urge all to start a conversation on lasting power of attorney, so that situations may be avoided where an individual may have a critical illness policy, but regrettably no access to the benefits.
About the Author
Vincent Lim is a licensed financial practitioner and holds the ChFC®️/S, and AEPP®️ designations.
The article “She Lies In The Hospital” by Vincent Lim first appeared on Tuesday Times, an online publication by IFPAS.
*PSA: Find out more about Lasting Power of Attorney (LPA), how to make one, where to find a certificate issuer and more here.