An Enduring Power of Attorney (EPA)
An Enduring Power of Attorney, otherwise referred to as an ‘EPA’, is similar to an ordinary Power of Attorney, and is a document in which you appoint a person of your choice to act on your behalf if you are unable to manage your own affairs.
An ordinary Power of Attorney is often given to lawyers so that they can sign documents if you are absent, the most common being contracts when you are buying or selling property and cannot be there in person. One of the major benefits of using this service, is that a Power of Attorney given to the lawyer allows him to sign for you – at your direction. However, if you lose what is known as your mental capacity, which is the ability to think clearly, understand what you are doing and the consequences of the action, and know what your assets are and the value of them, then the ordinary Power of Attorney will lapse resulting in stalemate. You haven’t passed away and so your Will has no relevance. You cannot communicate effectively and are not able to tell anybody what you want, even though you may still be rational. You are incapable of thinking clearly due to illness or injury, such as a major stroke or brain damage following an accident, or being comatose as your life nears its end. Sorry to be gloomy, but these are realities; fortunately for most people they are possibilities rather than probabilities. But who knows what lies ahead for any of us – this is why it’s imperative to have an Enduring Power of Attorney.
The worst possible situation is where a husband or wife loses their mental capacity and the spouse cannot act for his/her partner. Banks will not release money without authority, and if the owner is alive but cannot sign, then everything can grind to a halt. Joint ownership usually means either partner can sign cheques or authorise transactions and would eliminate some of the difficulties, but some couples choose to have individual bank accounts, investments and property; indeed, tax planning may play a part in dividing assets between a husband and wife as individuals. More importantly, many couples in Hong Kong do have what they believe is a joint bank account, not realising that more often than not, this joint bank account is in reality one spouse’s account with the other spouse’s name added. This effectively means that if the primary account holder loses his or her mental capacity, then the spouse could end up having no access to the account – this is especially where the Enduring Power of Attorney comes in.
In contrast to a normal Power of Attorney, an EPA will remain in force even if the person making the document (the donor) loses their mental capacity, and often the EPA is written to only take effect in such a situation.
To become legally valid, a Hong Kong Enduring Power of Attorney must be witnessed by a Hong Kong registered doctor, and then within 28 days of the doctor signing, the form must also be witnessed by a registered solicitor. The reasoning behind this is that the doctor will establish that the donor is of sound mind and the lawyer will confirm that the legalities are in order.
An Enduring Power of Attorney signed in Hong Kong will not serve to handle any affairs outside of Hong Kong, nor will Hong Kong accept an EPA from another country. In this respect, the worldwide rules require an Enduring Power of Attorney to be on a ‘prescribed form’ and each country is different. Some are easier than others, while all of them have their own signing requirements. For instance, most of the Australian states are fairly accommodating, simply asking that the witnesses are Australian citizens and that they fall within certain categories (teachers, clergymen, lawyers etc – the list is quite long). In the UK, an EPA must have a certificate signed by a person qualified to authorise it, whereas New Zealand requires that the witness is a lawyer or legal executive registered and practising in New Zealand. Every state in the US has its own version, and the same applies in Australia.
Without a Power of Attorney, there has to be a court case for every transaction with all the accompanying costs and worst of all, the government department, usually called the Court of Protection or something similar, is in control. Even signing documents to take a car off the road, for example, will require coast authorisation.
Once signed, your Enduring Power of Attorney should be kept safe together with your Will until the time appointed by your attorney (not necessarily a solicitor, but simply the person you wish to act on your behalf) needs to register it with the courts for it to take legal effect.
To find out more about Phoenix Wills’ Enduring Power of Attorney service and how we can help you, please get in touch with our friendly team in Hong Kong.