Everything you need to know about Powers of Attorney

*This content is brought to you by Brenthurst Wealth

By Malissa Conlin*

We often have requests to assist clients in drafting powers of attorney (POA) and usually, it is followed with a myriad of questions that stretch from what it may be used for, when and whether it endures after death or lack of mental capacity. As these questions have become quite frequent it felt pressing to me to write an educational piece that dealt with every element that pertains to powers of attorneys and the practicalities of utilising them and when they are no longer regarded as valid.

Parties involved in a POA

The Principal/Grantor/Donor

This person empowers another to perform action on his/her behalf and in his/her name. Not only do they empower a person to act, but they also assure third parties that the acts performed and the decisions made by such person acting on their behalf have the legal authority to do so.

A principal cannot grant powers of attorney to execute a will or institute divorce proceedings on his/her behalf.

The Agent/Grantee/Attorney-in-fact

This is a person who receives legal authority to act and decide on the principal’s behalf. An agent who is legally and properly authorised will be legally protected from any liability arising from contracts or agreements/ actions performed on behalf of the principal. 

However, if an agent is not authorised correctly and mislead a third party to believe they have such authority, the third party can hold the agent personally liable for breach of “warranty of authority”.  Further to this, an agent acting on an invalid power of attorney is committing fraud, which comes with legal consequences. 

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Types of POA

General Power of Attorney 

This allows an agent to perform a collection of specific acts on behalf of the principal, and unless a determinable term is specified, the validity of this POA normally terminates on insolvency, mental incapacity and death of the principal. 

Special Power of Attorney

This power of attorney limits the agent’s powers to perform a specific act specifically identified by the principal. Once successfully executed, the POA will lapse and be of no further force and effect.

Power of Attorney for Banking Purposes

Generally speaking, a General Power of Attorney would make provision for an agent, for example, to open, close or transact on the principal’s bank account, however, it would appear that South African banking institutions will not accept General Powers of Attorney that are drafted externally. Banks require that an account holder visit one of their nearest branches in person to sign a POA drafted by the bank itself. The powers with respect to this type of POA will always be restricted to allow the agent to perform limited acts on a specific account of the principal.

Reasons why a POA may be required

• Emigration – South Africans who have left the country before wrapping up financial and other affairs usually sign a POA to someone residing in South Africa to take care of their outstanding matters. 
• Out of the country for extended periods
• Assistance from experts is required – Examples: managing bank accounts and money, handling and filing of tax matters, entering into contracts, buying/selling/mortgaging and managing properties, etc. 
• Specific tasks to be performed – Examples: collecting pension, paying bills, renewing vehicle license.
• Where a person is temporarily incapacitated – unable to perform daily tasks due to illness, injury or hospitalisation.
• Fragility – where one may be too weak to sign documents physically. 

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Requirements for a valid POA

• It must be reduced to writing and clearly describe and identify the principal and the agent and the extent of the powers granted to the agent. 
• The principal must be 18 or older and have the capacity to perform and enter into legal and binding contracts. In other words, they must be adults who can manage their affairs; they may not be sequestrated or under curatorship. 
• Signed by the principal and the agent. When signing the POA, the principal must be mentally competent to fully understand the nature and extent of the powers being granted. The agent, too, has to be 18 years or older and competent and trustworthy when it comes to making financial and legal decisions and signing legal documents on behalf of the principal. 
• Ideally (although not prescribed in South African law) have the POA witnessed by two witnesses – these witnesses must be 14 years or older and capable of giving evidence in court. The witness signatures will enhance the validity of the POA. Witnesses are not allowed to gain any benefit from the POA. Alternative to witnesses is where a POA is signed before a Commissioner of Oaths, Magistrate, Justice of the Peace or Notary. 
• Concerning property transactions, the signed initial power of attorney, accompanied by the relevant documents, must be registered in the Deeds Office under the Deeds Registries Act 47 of 1937.
• Powers of Attorney executed outside South Africa for use in South Africa must be executed in the presence of a Notary Public. It must also be sufficiently authenticated depending on which country it is executed.
• This capacity to act must also be present during the whole period of the validity of the POA. As soon as a principal’s mental capacity diminishes (Dementia or Alzheimer’s disease) to the extent that they are no longer able to make sound decisions, the POA terminates (as soon as a positive diagnosis has been made by a medical professional.

TERMINATION OF A POWER OF ATTORNEY
The principal may cancel POAs at any time. However, a POA will automatically terminate should one of the following incidents happen to the principal: –

• Dies
• Becomes insolvent and the estate is sequestrated
• Becomes mentally impaired resulting in them no longer being able to manage their affairs and make their own decisions. Mental incapacity can arise from any one of the following incidents: mental illness (Dementia, Alzheimer’s disease), stroke or coma following an accident. 

Should any one of the above mentioned incidents occur, the POA will become void and the agent no longer has the power to act on the principal’s behalf, and may under no circumstances thereafter attempt to make use of a POA. Should an agent act on the authority of a lapsed POA, they may become personally liable for damages suffered, if any, due to them having no legal authority to act.

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Options available in the event of mental incapacity

It seems illogical that POA’s are essentially given to an agent to manage financial and personal affairs where the principal is unable to do so, yet when mental incapacity comes into play the POA is no longer regarded as valid and fails to endure. 

Unlike some other countries, South African law does not provide for an Enduring Power of Attorney, which remains valid despite the principal’s mental incapacities. Whilst proposals and recommendations have been made over the years to improve our laws to allow for an Enduring POA, nothing has come into effect at this stage, nor do we foresee this coming into effect any time soon. 

Therefore, where one suspects that a person is no longer of sound mind and no longer able to make sound decisions nor take care of their personal well-being, the following options are available to the personal suffering from mental incapacity:

Curatorship

This is an application that is brought before the High Court by an attorney in order to have a curator appointed.
The process requires affidavits to be signed by relatives, as well as appointing specialised medical practitioners in order for medical and mental assessments to be conducted and who then compile and submit a medical report for the court’s consideration. If all the requirements are met to prove mental incapacity, the court may then appoint a curator bonis, who is normally a legal representative that will be tasked to manage the finances, property and estate of the person suffering from mental incapacity.

Under more severe circumstances the court may also appoint a curator ad personam who will take on the responsibility of looking after the mentally incapacitated person’s physical welfare such as their accommodation, health and day-to-day care.

The curator will be responsible for performing a number of acts, such as handling financial affairs, submitting annual reports to the Master and giving consent for medical treatment. 

This process is both lengthy and costly. 

Administratorship

This is an application that is brought before the Master of the High Court, and executed by the Master in terms of the Mental Health Care Act. It is by far a much cheaper and less strenuous process. 

This process requires an affidavit justifying why a person needs to be placed under administratorship and why the party making such application should be appointed as the administrator, this needs to be accompanied by supporting documentation (medical reports) to confirm mental incapacity. Thereafter, the Master will conduct an investigation (approx.. 60 days) which will result in the application being accepted or rejected. It must be noted that the Master will allow an administrator temporary administration rights. Further to this, the administrator will only be allowed to deal with the person’s property and not their personal affairs. 

Special Trust

This may be a more appropriate solution to address the financial aspects of a person who may become mentally incapacitated. This trust can be set up while the person in question is still mentally sound but is important these trusts are drawn up by a trust specialist as they can become quite complex and careful considerations need to be made in respect to tax consequences. 

* Malissa Conlin, Admitted Attorney, FPSA® is the General Manager of Brenthurst Wealth and a wills and estate, legal and compliance executive [email protected]