The recent court case of former China tour guide Yang Yin and his subsequent imprisonment for misappropriating $1.1 million from a wealthy widow brought much attention to a relatively little-known legacy planning tool - the Lasting Power of Attorney (LPA).
Just as people tend to put off making a will, there are reasons why they do not get around to making an LPA. Perhaps they are unaware of its purpose or believe it is reserved for the aged and/or the very wealthy.
This may explain why the take-up rate has been low. Out of the adult resident population of about three million, only about 0.7 per cent, or 20,000 people, have applied for an LPA since the scheme started in 2010 under the Mental Capacity Act.
In the third instalment of a three- part series on legacy planning, The Sunday Times highlights why it may be necessary to have an LPA and the top considerations.
To recap, Yang was given an LPA by widow Chung Khin Chun, 89, in 2012 to manage her welfare and financial affairs. In her will, written earlier, he also stood to inherit all of the widow's assets.
Madam Chung's niece Hedy Mok succeeded in revoking the LPA and was instrumental in the making of a new will. In addition, Madam Mok commenced a series of legal actions against Yang in 2014. Madam Chung, who is childless, was diagnosed with dementia that year.
What is an LPA? This allows people to voluntarily appoint one or more persons (donees) to take decisions and act on their behalf as a proxy decision-maker if they lose mental capacity one day.
JLC Advisors' Mr Goh says that without an LPA, ''there will be uncertainty as to who can act as your proxy decision-maker''.
Goodwins Law Corporation's Ms Ang believes that getting an LPA ''should go hand in hand with making a will''.
JLC Advisors' Mr Lim notes that one advantage of having an LPA is that the donee would get quick access to funds.
DBS Bank's Mr Lam says an LPA ''will help to protect the interest of the individuals'' if they lose their mental capacity.
Legasy Planners' Mr Chee says LPA Form 1 works for most people and LPA Form 2 allows care to be specified.
The LPA allows donees to act in two broad areas - personal welfare and property. Naturally, it is unwise to wait until one is showing signs of physical or mental vulnerability before executing an LPA. Knowing that provision has been made for the future provides peace of mind, as no one can predict when illness or deterioration will take place.
Mr Alex Goh, an associate with JLC Advisors, says we are in a better position to know who can be trusted to be our donees.
"Without an LPA, there will be uncertainty as to who can act as your proxy decision-maker. An application would have to be made to court to decide who should be appointed as your deputy to decide and act on your behalf. In some cases, there may be friction between family members as to who should be appointed as deputy," he said.
Ms Ang Kim Lan, director at Goodwins Law Corporation, points out the differences between a will and an LPA.
"The provisions of a will kick in only when one passes on. However, if a person suffers a lack of mental capacity (for example, lapsing into a coma or suffering a stroke, brain injury, dementia and mental health issues), the will does not apply.
"Most of my clients thought that the will kicks in when such circumstances occur and were surprised when told otherwise," she said.
Mr Vincent Lim, a partner at JLC Advisors, notes that one advantage of the LPA is that the donee would get quick access to funds.
"If an LPA is in place, this will allow your donee to get quick access to funds necessary for your care and maintenance. Banks will allow your donee to take charge of your bank accounts upon presentation of documents such as the original LPA and a doctor's report certifying that you have lost the capacity to manage your own affairs," he said.
If you lose your mental capacity without an LPA, funds in your bank account cannot be touched until a court order is obtained appointing a person as deputy. It could create stress and inconvenience for loved ones who would, in the interim, have to pay for your care and maintenance as well as expenses relating to applying for the court order, Mr Lim added.
Ms Ang advised that an LPA should be taken out as part of a person's estate planning. She points out that it is not true that an LPA is a legacy planning tool for the very old or the very rich.
"In fact, it should go hand in hand with making a will. It is prudent to align both legacy planning tools so that there is continuity in the person's wishes, regardless of his or her mental capacity, and at death," she added.
Mr Brandon Lam, head of financial planning group at DBS Bank Singapore, said that as the population ages, the number of people with mental illness is expected to go up.
"Having an LPA in place will help to protect the interest of the individuals in case they lose their mental capacity," he said.
According to studies, after age 65, the risk of Alzheimer's doubles every five years. After the age of 85, the risk reaches nearly 50 per cent.
"That, to me, means that I'm very likely to get mentally incapacitated when I get older," said Mr Keon Chee, director of Legasy Planners.
What are the top considerations?
CHOICE OF DONEE
It is critical to choose the right person to be your donee because of the significant powers wielded by him or her. After all, the donee is someone conferred with the authority under the LPA to make decisions about your personal welfare and/or property and affairs when you no longer have the capacity to do so.
He or she should be someone who is trusted and competent and has good financial standing.
You can appoint more than one donee. If joint donees are appointed, they should be able and willing to work together to make decisions in your best interests, said Mr Goh.
SCOPE OF POWERS
In the LPA, you may decide to give the donee general powers for all your personal welfare and/or property and affairs, or only specific powers.
There are two LPA versions available. LPA Form 1 - which can be self-completed - allows you to grant general powers subject to basic conditions or restrictions.
Mr Chee said LPA Form 1 is like a "check the box" form for standard cases where the donee has almost full power over the donor's personal welfare and property affairs.
"This works for the majority of people. When a person becomes mentally incapacitated, the donee then steps into the donor's shoes and goes about acting for the benefit of the donor. However, Form 1 doesn't say 'please look after my mum and dad or even my cat'. Form 2 allows such care to be specified and/or performed through the trust," said Mr Chee.
LPA Form 2 needs to be drafted by a lawyer and allows you to tailor specific powers that are to be granted to the donee.
In both forms, you will find the terms "personal welfare" and "property and affairs".
A personal welfare donee is authorised to decide on matters such as where you are to live, whom you may have contact with, what social activities you take part in and what you wear and eat.
What is the Mental Capacity Act?
Provisions of the Mental Capacity Act (MCA) address the need to make decisions on behalf of people aged 21 and older who lack the mental capacity to make their own decisions.
The Act allows the court to appoint a deputy to make decisions, and act, on behalf of a mentally incapacitated person who has not made a Lasting Power of Attorney (LPA).
The Act also allows parents of intellectually disabled children (below the age of 21) to apply to the court to appoint a deputy.
The Act empowers the court to step in earlier if those appointed as proxy decision- makers present a risk of abusing their powers. This is to prevent vulnerable elderly people with sizeable assets from being exploited as the society ages and grows in affluence.
A property and affairs donee will have control and management of your property. Among other things, he or she can deal with your property, handle your tax matters and invest your savings.
Those who have assets of a larger and more complicated value may prefer to tailor the powers to be granted to their donees in respect of their property and affairs.
APPOINTING PROFESSIONAL DONEES
Earlier this year, changes to the Mental Capacity Act enabled professionals such as lawyers or social workers to step in and be appointed as professional donees.
This is significant as people who are single, divorced or elderly and have no next-of-kin or close friends - and thus no one to rely on to be their proxy decision-makers - can consider appointing professional donees. Even those with family members now have the option of paying professionals to be donees.
They may prefer this if they have complex instructions about their care and assets, or if they want to prevent heated disagreements among their loved ones.
AN LPA DOES NOT OVERRIDE AN ADVANCE MEDICAL DIRECTIVE (AMD)
You should be aware that your LPA does not override an AMD if you have registered one.
An AMD is a legal document in which you register in advance your wishes not to have any extraordinary life-sustaining treatment to prolong life when you are suffering from a terminal illness, requiring extraordinary life-sustaining treatment, and are unconscious or incapable of exercising rational judgment over your own treatment.
CASE 1: WHEN THERE IS NO LPA
Ms Ang Kim Lan from Goodwins Law Corporation recounted the sad example of Ms Koh Lay Lay (not her real name), 23, who was involved in a car accident and was reduced to a vegetative state. Her father applied to the court to be a deputy as he sought authority to manage his daughter's personal welfare matters, including initiating legal proceedings against the appropriate parties responsible for her condition.
Ms Koh is neither old nor rich. If she had drawn up a Lasting Power of Attorney (LPA), her father need not have spent money and time to get the court order to be her deputy to manage her affairs.
CASE 2: APPOINTING PREFERRED DONEES
Madam Mary Heng (not her real name), 75, is a widow with three grown-up sons. The two older sons are already professionals and have received their inheritances from their mother in the form of education funding and financial assistance with the purchase of their properties.
In her will, she appointed her youngest son as the executor and gave everything to him.
When told that in the absence of an LPA, the youngest son is not necessarily the donee, Madam Heng was shocked.
She realised that as her youngest son is still studying overseas, should she become mentally incapacitated, her older sons may apply to court to be appointed deputies to handle her affairs.
Goodwins Law Corp's Ms Ang recalled: "She told me that it is highly likely that the two sons may spend her money freely as they have already been informed that they will not be getting any more money from her if she passes on. For example, they are likely to buy a Mercedes for ferrying her around instead of just a Toyota."
Madam Heng decided to make an LPA appointing the youngest son and the eldest son to be the donees, so as to align her will with the LPA.
CASE 3: WHEN GENERAL PA IS NOT ENOUGH
Mrs Lilian Yeo (not her real name), 89, was selling her solely owned flat and waiting for her first appointment with the HDB.
However, she was about to have an operation under general anaesthesia. If she passed away, proceeds from the sale of the flat would be distributed according to her will. However, there was the risk that the operation or effects of general anaesthesia could make her fall into mental incapacity.
Mr Keon Chee of Legasy Planners advised her to draw up an LPA for that brief period of risk. This is because a general power of attorney (PA) wouldn't work if she loses mental capacity. A person can use a general PA when he or she cannot be around to complete a transaction such as to sell or buy an HDB flat. It works only when the donor is alive and mentally sound.
So if Mrs Yeo had appointed someone to sell the flat for her via a general PA - because, say, she was too frail - then the process would have become stuck if she fell into mental incapacity during the sale process without an LPA in place.
With an LPA, she has peace of mind that her donee(s) can ensure that the flat would be sold and the proceeds properly utilised.
The Ministry of Health has stated that making an AMD is a voluntary decision, and cannot be made on behalf of another person.
And regardless of objections from family members, doctors will have to respect a person's AMD.
FEE FOR LPA APPLICATIONS
From Sept 1 this year, the application fee for LPA Form 1 for Singaporeans was revised to $75. The good news is that this fee is waived for another two years, until the end of August 2018. The fee waiver for LPA Form 1 applications was introduced in 2014.
This means we will be able to file LPA Form 1 applications for free until this date, although people will still have to pay fees charged by professionals engaged to witness and certify the application, such as medical practitioners and lawyers.
The fee of $200 for LPA Form 2 for Singaporeans remains unchanged.
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