You’re not alone. Every Australian family will be affected by dementia. As we get older, we need to have in place some important legal documents to protect ourselves, our family and our assets. If you wait too long, it could be too late.
In 2021 dementia affects almost 50 million people worldwide, which is predicted to increase to 131.5 million people by 2050. Every three seconds another person somewhere in the world develops dementia.
Dementia is the term used to describe the symptoms of a large group of illnesses which cause a progressive decline in a person’s functioning.
It is a broad term used to describe a loss of memory, cognitive skills, intellect, rationality, social skills and physical functioning.
There are many types of dementia including Alzheimer’s disease, vascular dementia, frontotemporal dementia and Lewy body disease. Dementia can happen to anybody, but it is more common after the age of 65.
Australia has an aging population. ABS statistics project that the number of Australians aged 65 and over is expected to increase rapidly, from around 2.5 million in 2002 to 6.2 million in 2042. That represents an increase from around 13 per cent to around 25 per cent of Australia’s population.
In order to make any estate planning documents (Wills, Enduring Powers of Attorney, Enduring Powers of Guardianship and Advance Health Directives), the law requires the maker to have soundness of mind and an understanding of what he or she is doing when making their estate planning document.
Sometimes a person is not able to make one or more of these documents, because they lack sufficient capacity to do so.
Lawyers call it ‘incapacity’. Doctors talk about ‘incompetence’. Old movies and tv shows use the phrase ‘not of sound mind’.
Estate planning is not just an activity for the elderly, but it is certainly a more pressing issue for those in the later stages of their lives. If estate planning is left too late, the consequences can be devastating, both for the person and their loved ones.
The implications of a person being unable to make an estate planning document due to incapacity varies, depending on the person’s circumstances. It could result in the need for the State Administrative Tribunal to become involved and make orders in respect of the person’s financial affairs and/or medical treatment and care.
It may result in the person’s estate being distributed on their death in accordance with an outdated Will that no longer accurately reflects their circumstances or wishes.
Alternatively, the person’s estate may be distributed in accordance with rigid entitlements set out in State legislation, if the person had never made a Will.
The main problem with these fallback alternatives, is that the person doesn’t really get a say.
Their ability to have a say is essentially lost when they lose capacity, So decisions about who looks after their finances, who stands to benefit from their estate and how their future care decisions are made, might be decided by a b8unch of overworked bureaucrats in a Government agency.
How is incapacity determined?
It’s important to note that standards for capacity are task-specific. Whether a person has the legal capacity to do something, depends on what it is they intend to do. Capacity to make a Will is different to capacity to fill-in a Medicare form.
Further, capacity is not like a light switch – either on or off. There is a sliding-scale or continuum of capacity. People can be temporarily affected by pain, grief, medication, accident, illness or surgery. They can have good days and bad days.
With Australia’s ageing population, matters of capacity are becoming increasingly urgent and common. The best thing we can do to avoid some of the worries that come with losing capacity is to ensure that those close to us have appropriate estate plans in place, early.
If you are concerned because you know somebody who doesn’t have an appropriate plan in place and who may not have capacity, or may have declining capacity, we recommend that you encourage them to consult a lawyer who specialises in estate planning as soon as possible so it does not become too late for them.
A specialist lawyer will carefully consider an estate planning framework to minimise the risk of incapacity by a key decision-maker, and what should be done if that happens:
- Determining capacity – how and when is this to be done?
- Capacity to make, revoke or amend testamentary dispositions including Wills, powers of attorneys, directives for personal care and, death benefit nominations;
- Capacity to contract or make gifts, or transfer real or personal property;
- When is medical testing and intervention required?
- Planning ahead to manage capacity issues through company constitutions, trust deeds and other instruments.
The Critical Importance of an Enduring Power of Attorney
Confronting our own mortality and potential incapacity can be a difficult topic for many people, but it is an essential process to ensure that your wishes and the wishes of your loved ones are known and protected.
When making these arrangements, it’s important to factor that at some stage in the future you may lose the capacity to make sound decisions about particular areas of your life.
This inability may be temporary (for example, if you are in a coma following an accident) or permanent (for example, if you have suffered a stroke, with a prognosis that you will never regain capacity).
As these circumstances can’t be predicted, every person should include as part of their estate planning legal documents instructing who is permitted to make decisions on their behalf should they lose capacity to do so.
- if I ever lose capacity the Executor of my Will can act on my behalf; and
- if I ever lose capacity then my spouse will automatically be able to act on my behalf.
In reality, the instructions outlined in a Will only come into effect upon your death. Naming a person as Executor in your Will does not give them authority to act on your behalf whilst you are still alive, even if you no longer have capacity; and your spouse can only act informally in certain situations.
In particular, they will be unable to make significant financial decisions on your behalf unless a formal appointment has been made.
If you have not included incapacity as part of your Estate Plan, then State legislation dictates who will make personal/health and financial decisions on your behalf.
In South Australia, the document you need for health and guardianship matters, is an Advance Care Directive; and for financial decisions (such as accessing your bank account to pay bills, or to sell your home), the document you need is an Enduring Power of Attorney.
Like insurance, you have to have these protections in place BEFORE you need them. You cannot apply for insurance AFTER the bushfire has swept through your property.
Similarly, you cannot wait until the disaster strikes to create an EPA or ACD document. If you wait too long, you could be too late, because once you lose capacity, you might never regain it.
If you lose capacity and don’t have these estate planning documents already in place, then somebody (generally a spouse, family member or friend) will need to apply to the South Australia Civil and Administrative Tribunal (‘SACAT’) for formal appointment as your Guardian and/or Financial Administrator.
If an application is made with SACAT they will assess it and determine whether it is suitable for the applicant to be appointed as your Financial Administrator, or if there is a more suitable option (which may include appointing the Public Trustee to act on your behalf, for a scale fee).
Similarly, SACAT may also make a determination as to who should be appointed as your guardian where relevant (which may include appointing the Public Advocate).
By preparing an Enduring Power of Attorney you can choose who you want to make decisions on your behalf if you were to unexpectedly lose capacity.
This document provides your trusted agents with the legal authority they require to act on your behalf, avoiding the need for them to apply to SACAT as your Guardian or Financial Administrator (which can be a 6 month process).
What can an Enduring Power of Attorney do for me?
- specify who is to act on your behalf (this may be one person or multiple people);
- outline whether legal and financial decisions are to be made by the same person, or separate people;
- nominate substitute agents if your initial attorney is unable to act;
- for financial matters, specify when the power is to begin (for example, are your attorneys to act immediately, or only if you lose capacity); and
- limit your agent’s power, if you wish to do so.
An Enduring Power of Attorney is a crucial component of any Estate Plan. Incapacity can strike at any stage of life and an appropriately drafted Enduring Power of Attorney will decrease the stress, inconvenience, delays and uncertainty during a very stressful time, both for yourself and your loved ones.
Contact the oldest law firm on South Australia – Genders and Partners, established 1848 – to learn more about retirement planning, superannuation, estate-planning and estate-administration solutions, by visiting our website today and schedule a free no obligation telephone consultation to find out how we can help you and yours.
Remember – like insurance, you cannot afford to wait until the disaster strikes, before putting protections into place. You cannot apply for insurance after the bushfire has swept through your property.
You have to have the protection on place before you need it. The same applies with your estate plan. Do NOT put this off. You must not wait until you think you might need it.
You need it now! Once you have lost your capacity, you will not be able to create the documents you (and your family) need you to have in place.
To learn how to protect yourself, your family and your assets, by creating a professionally-made estate plan, claim your FREE 15 minute Telephone Consultation
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