Last week I wrote about an estate with R10 million of life cover sitting in it that nobody could reach. The man had done everything properly. The cover was nominated to his wife so it would get to her fast. Then the news of his death put her in hospital, and for a period afterwards she was not in a position to manage her own affairs.
Four different people, who do not know each other, asked me the same question in the comments. All of them arrived at it independently. All of them phrased it slightly differently. Every one of them was asking a version of the same thing:
Surely somebody could have stepped in? Surely there is a power of attorney, or a family member, or some arrangement for exactly this?
It is the right question. It is also the question that South African law answers badly, and the answer is the part almost nobody knows until they need it.
What a power of attorney actually does
A power of attorney is a document in which you authorise someone else, your agent, to act on your behalf. Sign here, sell that, transfer this, sign for me at the bank. It is enormously useful. If you are working overseas and need a property transfer signed in Durban, it is exactly the right tool.
It rests on one simple legal principle, and that principle is also the thing that breaks it.
Your agent's authority comes from you. They cannot do anything you could not have done yourself. As one estate law firm puts it, "a Power of Attorney becomes inoperative the moment the grantor of the power loses capacity. The reason being that an agent cannot have more power than the principal."
So the moment you cannot make decisions, neither can the person you appointed to make them for you. The document does not fail because it was badly drafted. It fails because the authority behind it has gone.
The part that catches families out
Here is where it gets uncomfortable, because this happens quietly and often.
A parent is diagnosed with dementia. A spouse has a stroke. Someone is in an accident. The family has a power of attorney signed years ago, so a son or a daughter carries on paying the bills, moving money between accounts, dealing with the medical aid. Nobody tells them to stop. The bank does not always know.
But legally the position is clear. In the words of the same firm, "It is thus unlawful to act based on a Power of Attorney, if you are aware that the principal has lost capacity."
Families who are doing their absolute best, out of love and at considerable personal cost, are frequently acting without authority and have no idea. It usually only surfaces when something big needs signing. A property sale. An investment withdrawal. A claim on a policy. That is when someone asks the question properly, and everything stops.
What actually stops working
People imagine incapacity as a medical problem. Financially it is an administrative one, and the list is longer than you would expect.
Nobody can sell or transfer property in your name. Nobody can switch, withdraw from or restructure your investments. Nobody can sign a claim form on your behalf, which is worth sitting with for a moment: if you are the beneficiary of a policy and you are incapacitated, you may not be able to claim the money that is already legally yours. Nobody can sign a lease, a contract, or a tax return. Nobody can access accounts in your sole name.
Debit orders keep running, which sounds helpful until you realise nobody can stop the ones that should be stopped.
Route one: curatorship
The traditional answer is an application to the High Court, under Rule 57, to have a curator appointed. A curator bonis looks after your finances. A curator ad personam looks after decisions about you personally.
It works. It is also slow and expensive.
Published figures for an unopposed application put the cost at "roughly R25,000 to R80,000 ... once attorney fees, counsel, Master's office fees, the curator's bond and sheriff's fees are combined", and the timeline at "two to six months from first instruction to court order". That assumes nobody contests it. If the family disagrees about who should be appointed, both numbers climb.
And it does not end there. A curator earns remuneration, files accounts that must be audited annually, and carries a bond whose premium recurs every year for as long as the curatorship lasts. The larger the estate, the larger the bond and the larger the ongoing cost.
So a family already dealing with the worst thing that has ever happened to them is asked to find tens of thousands of rand, wait several months, and then carry an annual cost indefinitely. All to get permission to manage money that was theirs all along.
Route two: an administrator through the Master
There is a cheaper route. The Mental Health Care Act allows the Master of the High Court to appoint an administrator over the property of someone who cannot manage their own affairs. Any person over 18 can apply, supported by medical reports, and it is lodged with the Master rather than argued in the High Court. It is genuinely faster and cheaper.
There is a catch, and it is a big one. The route is limited by the size of the estate. Where "the patient's estate has capital assets less than R200 000 or their income is less than R24 000 per year, the Master can appoint an administrator on application." Above that, the Master appoints an interim administrator pending an investigation, and larger estates end up back in the formal process.
Which means the affordable route is the one available to people with the least, and the family in my last article, with a house, a business interest and a share of a family property, does not qualify for it.
Why has nobody fixed this?
Most countries solved this decades ago. England and Wales have a lasting power of attorney, a document that specifically survives your loss of capacity, which is the entire point of it. South Africa does not have one.
Not for want of trying. The South African Law Reform Commission investigated this under Project 122 and published a report titled "Assisted Decision Making: Adults with Impaired Decision-Making Capacity" on 31 March 2004. It "sensibly recommended legislation for an Enduring Power of Attorney, both in respect of an individual's person and estate." Draft legislation was "most recently submitted to the Minister of Justice on 19 September 2016."
Recommended in 2004. Redrafted and submitted again in 2016. Still not law.
So what can you actually do?
I want to be straight with you here. There is no clean fix, because the instrument that would fix it does not exist in our law. What follows reduces the damage rather than removing the problem, and anyone who tells you otherwise is selling something.
Make sure your spouse is not dependent on your signature. This is the cheapest and most effective thing on the list, and it costs nothing. Separate accounts in their own name. Their own income where possible. Their own cover. Both names on the things that matter. A household where one person signs for everything has a single point of failure, and it is a person.
Nominate estate liquidity to your estate, not only to a person. This is the fix from the last article and it does double duty. Money nominated to your estate can be used by your executor without anyone signing anything. Money nominated to a person requires that person to be able to act.
Consider a trust for assets that must keep working. Assets held in a properly run trust with more than one trustee do not stop when one trustee becomes incapacitated. There is also a specific structure recognised in the Income Tax Act, "a trust created solely for the benefit of one or more persons who is or are persons with a disability", which carries favourable tax treatment. Trusts cost money to set up and run and they are not right for everybody, so this is a conversation to have properly rather than a box to tick.
Know your marital regime, and know what it means on incapacity as well as on death. Most people can tell me whether they are in or out of community of property. Almost nobody has thought about what it means if one of them cannot sign.
Understand what a living will does and does not do. A living will records your wishes about medical treatment. It says nothing about your money. People often believe they have covered themselves because they have one. They have covered a different problem.
Write down where everything is. Policies, accounts, advisers, the will, the passwords. If your family does have to go to court, the application is faster and cheaper when they can actually list what you own.
The question worth asking yourself
Not "what happens if I die". Most people have thought about that, and most have at least something in place.
The better question is the one four strangers asked me in a comment thread last week without realising they were asking it about themselves.
If you could not sign your name tomorrow, who could act for you, and under what authority?
If the answer is "my wife has power of attorney", the honest answer is nobody. Not because your planning was careless, but because the document you are relying on was never built to survive the moment you need it.
That is worth knowing before it matters rather than after. If you want to work through your own position properly, book a free 30-minute call and we will go through it together.
