LEGAL CORNER

IMPORTANT ASPECTS RELATED TO A POWER OF ATTORNEY

By Carl Muller | PWM Legal Executive

A power of attorney can briefly be defined as a document whereby one person (generally referred to as the principal) gives another person (generally referred to as the agent) authority to act on their behalf in matters related to property, business affairs, financial matters etc.

A distinction is made between a general power of attorney and a special power of attorney. The scope of a general power of attorney is wider and usually allows the agent to make decisions and act on behalf of the principal in numerous types of transactions and perform a variety of acts in this regard. A special power of attorney is more limited, and generally relates to a single transaction or authorises the agent to act on behalf of the principal in relation to a specific matter or specific assets.

It is important to note that, unlike the legal position in certain foreign jurisdictions, South African law does not make provision for an enduring power of attorney. This means that a power of attorney will automatically be terminated if the principal becomes of unsound mind, resulting in the principal being incapable of managing his/her own affairs. In such an instance there are two possible solutions:

i. The appointment of an administrator by the Master of the High Court in terms of the Mental Health Care Act; or
ii. The appointment of a “curator bonis” (to look after the financial affairs of the incapacitated person) and a “curator ad personam” (to manage the day-to-day affairs of the incapacitated person) by the High Court.

Although appointing an administrator is a simpler and cheaper process than appointing a curator, its application is limited as it only pertains to mentally incapacitated persons with an annual income below R24 000 and an estate value of less than R2 00 000.

It should further be noted that a power of attorney will lapse when the principal dies, as the latter’s estate will then be dealt with and wound up by the appointed executor of the deceased estate. A power of attorney will likewise expire when the principal becomes insolvent, as the principal’s financial affairs will then be managed by an appointed trustee.

IN CLOSING

Where an individual wants to bequeath assets for the benefit of a mentally incapacitated or an insolvent person, using a trust for the benefit of such person should be considered.

Disclaimer
This article is not intended as and does not constitute financial or any other advice. The article does not take into account your personal financial circumstances. For this reason it is recommended that you speak to your accredited financial planner to consider all your options and draw up a plan to achieve your financial goals.