What does the Mental Capacity Act mean for you?

Who will manage your assets should you become mentally incapable? Here’s what you should know about the new Act. -ST

Tue, Apr 20, 2010
The Sunday Times

By Lorna Tan, Senior Correspondent

Planning for an uncertain future is easier now that you are allowed to appoint others to make decisions on your behalf, should you lose your mental faculties.

This was made possible by the Mental Capacity Act which came into effect at the start of last month.

Prior to this, it was not possible to plan ahead and pick someone of your choice as no laws covered this tricky area of life. Back then, if you had lost your mental capacity, the only option was to have the courts appoint a so-called Committee of Persons to oversee your affairs.

With the new Act, anyone above the age of 21 can voluntarily choose a proxy decision maker, known as a donee, and spell out the areas of decision-making in a legal document called a Lasting Power of Attorney (LPA).

The LPA confers the donee(s) the authority to make decisions concerning the donor’s welfare and/or property and financial matters. For welfare matters, only individual donees can be appointed while for property and financial matters, the donees can be an individual or an entity such as a licensed trust firm.

The LPA has to be lodged with the Office of the Public Guardian (OPG) which is under the Ministry of Community Development, Youth and Sports.

The office has started taking applications via voluntary welfare organisations. Direct applications from members of the public will be taken from June.

Q Why do we need the Mental Capacity Act?

People aged 65 and above comprise 8.6 per cent of the population here now, but this will grow significantly to 12.9 per cent in 10 years.

As Singapore’s population ages, the number of people with mental illness here will gradually rise. Mental capacity is the ability of a person to make a specific decision at a particular time. The conditions that can cause mental incapacity include stroke, brain injury, dementia, mental health problems and intellectual disabilities.

Five years ago, there were about 22,000 people with dementia in Singapore. This is estimated to grow to 53,000 in another decade.

The Act safeguards those who lose their mental capacity. It also protects singles, childless couples and parents who have children with intellectual disabilities. For instance, these parents can appoint trusted people to take their place as decision makers should they die before their children.

For those who already suffer from a lack of mental capacity but have not made an LPA, the Act allows for the appointment of proxy decision makers called deputies.

Q I already have a will. Do I need to register an LPA?

A will is different from an LPA in that a will allows a person to plan how his affairs will be managed after death, while an LPA allows the person to plan how his affairs will be managed when he is still alive, but without mental capacity.

However, an LPA does not provide for the distribution of the person’s assets once he has died. This is still dealt with in accordance with his will, or if there is no will, according to the laws of intestacy, said Mr Lim Ker Sheon, director at law firm Characterist LLC.

Q How do I apply for an LPA and what is the cost?

You can obtain an application form for an LPA at www.publicguardian.gov.sg or from the OPG at SLF Building, Thomson Road. There are two LPA forms – Form 1 and Form 2 – and you pick one based on your needs.
Complete it and register the LPA with the OPG. The registration fee is $50 for Form 1 or $200 for Form2.

Besides the $200 registration fee for Form 2, Rockwills Trustee currently charges an acceptance fee of $300 to act as the property and affairs donee. Separately, a fee has to be paid to a lawyer for drafting the terms and other services. The legal fees are $300 to $500 for something standard but they could be higher depending on the special powers or restrictions required by the donor.

There is a six-week waiting period which allows for objections to be raised such as in cases where the LPA was made under duress. If there are no objections, the LPA will be registered and a donee ID card is issued to the donee.

Q How do I choose between LPA Form 1 and Form 2?

The LPA Form 1 is suitable for those whose family background is relatively simple, said Ms Ang Kim Lan, director at Goodwins Law Corp.

It was designed to be user-friendly, and it helps if the donor has donees that he trusts – such as a spouse – to be able to make decisions quickly and firmly in the best interest of the donor and his family, said Mr Lim.

Mr Lee Chiwi, chief executive officer of Rockwills Trustee, highlighted the point that only individuals can be appointed in the case of Form 1.

“Most people relying on close relatives to deal with assets like a bank account or a residential property which they live in will probably need to use only Form 1,” he said.

LPA Form 2 allows for customisation of the donee’s powers. This is required where the donor’s estate is more complicated or sizeable. For instance, in cases where the assets comprise properties where there is a need to buy and sell assets, or there is active management of investments and ownership of private businesses, added Mr Lee.

The services of a professional may therefore be required. For Form 2, a licensed trust company can be appointed as a donee.

Mr Lim added that for Form 2, the donor is able to give very specific directions to his donee(s) on how they are to handle certain specified situations. Examples include when and under what circumstances and at what reserve price to sell a certain property.

Q What are the advantages of the LPA?

The donor’s powers are governed by the terms of the LPA. This gives a clearer picture of what the donee can or cannot do. For instance, the donee may not execute the will for the donor.

The donee must follow the principles laid down in the Act, including the principle that the donee must act in the donor’s best interests.

The law states that a licensed trust company can be the donee or deputy (in the case of a person who already lacks mental capacity). This is helpful as the donor need not just appoint his family members who may or may not be savvy in investment matters, said Ms Ang.

Q What are the disadvantages of the LPA?

As in many areas of life there is always the possibility of abuse. For instance, the donee may abuse the trust placed in him and may deal dishonestly with the donor’s assets.

“The Act itself has some protective measures to prevent abuse, such as by disallowing bankrupts to be donees, and most institutions will in all likelihood have their own measures to minimise abuse, such as by putting in place strict standards for proving the donor has lost his mental capacity before allowing the donee to deal with the donor’s assets,” said Mr Lim.

“However, particularly in areas such as the sale of a donor’s property, there may foreseeably be potential for abuse, and the donor’s remedy in those situations is to sue the donee, who may have already absconded or otherwise have divested himself of the monies,” he added.

Q What should I consider when selecting my donee(s)?

The law requires that the donee is at least 21 years old and must not be an undischarged bankrupt. Besides that, Ms Ang suggests that the normal considerations to take note will be the ability, the honesty, integrity and the willingness of the donee to take on the responsibility.

Mr Lim recommends that there be at least two donees, who must act jointly – that is, both must agree – and can work well together. Depending on the size of the assets and one’s investment goals, one may also wish to consider leaving this in the hands of professional trust firms.

Q What happens if the donee is irresponsible?

The OPG website offers several guidebooks on the Act as well as The Code of Practice, which is a guide of best practices for everyone who interacts with a person lacking mental capacity.

If you suspect abuse or the neglectful treatment of someone who is mentally incapacitated, report this to the OPG.
The Act gives protection to the whistle-blower who will not incur any civil or criminal liability and your identity will also be protected.

If the caretaker ill-treats or neglects his charge, the penalty is a fine of up to $4,000, four years’ jail or both. If the action results in death, he may be fined up to $20,000 and jailed up to seven years.

Q What are the other considerations?

Mr Lee pointed out that LPAs are effective while the person is still alive but will become void when the person dies. Drawing up a will will assist in the distribution of your estate after your death. But if assets are to be managed for the long term for other beneficiaries long after your death, then a trust is required.

Rockwills offers the “UStandby” trust which enables you to remain in complete control of your assets until a specified event occurs, such as mental incapacity or death. When that happens, Rockwills will administer your assets for you and your beneficiaries.

A minimum amount of $1,000 is required to be parked in the ‘UStandby’ trust. There is a set-up fee from $3,000 but there is no annual administration fee imposed till the fund becomes activated when death or incapacity occurs.

Together with the LPA, the trust can give Rockwills’ clients a more comprehensive solution. Once the trust is active, the annual fees are a percentage of the assets held, subject to a minimum of $3,000.

lorna@sph.com.sg

This article was first published in The Straits Times. Link

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