The recent legal saga surrounding Yang Yin, a former Chinese tour guide, and his alleged misappropriation of 1.1 million SGD worth of an 89-year-old elderly widow’s assets has drew considerable attention to the concept of a Lasting Power of Attorney (LPA). According to the Straits Times, 8360 applications for a LPA were accepted in 2015, an increase in nearly 160% from the previous year.
In this article, we will explore what a LPA is, how can you create a LPA, and what it means for you and your loved ones.
What is a LPA?
A LPA is a legal document which allows a person (known as the “donor”) to appoint one or more persons (known as the “donee(s)”) to make decisions and act on his behalf if he loses mental capacity one day. The donor should be at least 21 years old and have the necessary mental capacity to create a LPA.
A properly executed LPA will protect you and your loved ones’ interests should you lose mental capacity
The benefit of making a LPA is that should you lose mental capacity, your donee(s) will be able to immediately step forward and make the necessary choices to protect your interests.
Without a LPA, your family members may have to seek a court order to appoint a deputy to manage your affairs on your behalf should you lose mental capacity. This is likely to be an exhausting and costly endeavour for them and the court-appointed deputy may not necessarily be who you may have preferred.
Creating a LPA will not only allow you to indicate your choice on who will make decisions on your behalf, but also spare your loved ones from the considerable stress of navigating the legal labyrinth should you unfortunately lose mental capacity.
A LPA and a will are 2 entirely different legal instruments
Although these 2 legal documents are often discussed in the same breath (and many law firms will offer to draft them together), they are different legal documents with significantly different purposes and implications.
|Function||Enables you to express your wishes on how to allocate your remaining assets (also known as your estate) after your death||Allows you to appoint donor(s) to make decisions on your behalf after you lose mental capacity|
|When does it take effect?||After your death||After you have lost your mental capacity (but are still alive)|
|Need for registration||Optional to deposit will information with Will Registry||Application must be registered with OPG for LPA to have legal effect|
Your donee should be someone you trust
Although there are legal safeguards in place to prevent abuses, do pay particular attention to appoint trustworthy individuals to avoid the regrettable fate of Madam Chung, the victim of the Yang Yin case.
The vast majority of donors choose donees from within their own immediate family (87.1% of donees were from the donor’s immediate family as of 2015 – OPG Annual Report 2015). Your donee should be someone you trust to respect and act in your interests should you lose mental capacity, and is competent and willing to take on the responsibility of doing so. Your donee(s) cannot be undischarged bankrupts.
Donee(s) can be appointed to act in 2 broad areas, to make decisions related to your personal welfare or your property & affairs. You may empower each donee to make decisions and act in either, or both areas. If you appoint multiple donee(s), you may indicate if they are to make these decisions jointly (your donees must act together) or jointly and severally (your donees may either act together or on an individual basis on your behalf)
After choosing your donee(s), simply fill up the appropriate form, get it certified by a certificate issuer, and register your LPA application with the OPG.
To start your LPA application, you should first choose between the 2 standard application forms provided on OPG’s website. If you wish to grant your donee(s) general powers with standard restrictions, the simpler Form 1 will be ideal, while if you have non-standard requirements and wish to grant your donee(s) customized powers you will need to fill up Form 2 instead (note that the annex in Form 2 has to be drafted by a solicitor). Both forms give you options on which powers you wish to bestow on your donee(s) and limitations you wish to impose on them.
After you filled up the form, both you and your donee(s) will need to sign it to indicate your agreement to the terms and limitations stated within. The form must then be certified by a certificate issuer, who may either be a lawyer, a registered psychiatrist, or a medical practitioner accredited by the Public Guardian. This is to ensure that you as a donor understand the purposes and scope of the powers you are bestowing, and are not induced by fraud or undue pressure.
After certification, the final step will be to register your LPA application with the OPG. Only upon successful registration will your LPA take legal effect.
A LPA only takes effect should you lose your mental capacity
A loss of mental capacity is defined in the Mental Capacity Act as being “unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain”, and may be either temporary or permanent. Your donee will be empowered by the LPA to make the decision on your behalf only when you have lost mental capacity to make that specific decision. Should you recover mental capacity, your donee(s) will no longer have the power to make decisions on your behalf.
A donor is considered to be unable to make a specific decision if he/she is unable to
- Understand the information relevant to the decision;
- Remember the information;
- Weigh up the information; and/or
- Communicate his/her decision
Mental capacity is assessed on a case-by-case basis, based on the donor’s ability to make a particular decision (e.g. a donor may be able to decide on day-to-day purchases but not on large scale investments). While an informal assessment of the donor’s capabilities may be sufficient to decide if he or she is able to make day to day decisions like whether he/she can go out alone, a donee is strongly advised to get medical certification to prove the donor’s loss of capacity before making important decisions for him (e.g. conveyance of real estate), which may be subsequently subject to legal challenges.
Your donee(s) are empowered to make decisions on your behalf, subject to certain limitations
Once it has been established that you no longer possess mental capacity to make decisions or act for yourself, your donee(s) may simply step forward and make decisions on your behalf without going through legal formalities (although external parties dealing with your donee(s) may require medical certification and the original LPA form). Generally, your donee(s) will be permitted to act according the authority you have bestowed upon them and any parameters you have imposed in your LPA form. This may include managing your bank accounts, investments, and properties, making gifts to other people, or making decisions related to your personal welfare such as where you should live. Therefore, you are advised to be very careful on what decisions you empower your donees to make on your behalf.
Your donee(s) are prohibited by law from making some decisions for you. This include executing a will or making an Advanced Medical Directive on your behalf, making or revoking your CPF or insurance nominations, and consenting to marriage or divorce on your behalf.
Note that if your donee(s) pass away or are otherwise unable to serve as donee(s) (e.g. being undischarged bankrupts or losing mental capacity themselves), they may only be replaced if you had appointed a replacement donee in your LPA application. If all of your donee(s) are dead or unable to serve as donee(s), your LPA will be revoked.
Legal safeguards exist to ensure your donee(s) act in your best interests, and protect you from abuse and mismanagement
Recent high profile abuse cases such as Yang Yin’s raises significant concern of the potential for abuse of the considerable powers bestowed by a LPA. However, several statutory safeguards exist to safeguard you from any unscrupulous donee(s)
Section 6 of the Mental Capacity Act requires donee(s) to act in the best interests of their donor, and sets out what is meant by “best interests”. This means your donee(s) must take into account your opinion when you were still mentally competent, your present wishes and feelings, and your beliefs and values that may have influenced your decision. Section 13 and 14 also limits the scope of your donee(s)’ powers, especially with regards to making gifts out of your assets.
The courts retain the right to revoke the LPA in suspected cases of abuse and/or fraud. Any person (such as your relatives) may apply to the courts to have the LPA lifted if they suspect that your donee(s) are not acting in your best interests or have contravened their authority. If proven, the courts may revoke the LPA or the offending donee’s authority. In egregious cases of abuse or mismanagement, the offending donee may face further legal implications such as criminal charges for criminal breach of trust (like Yang Yin) or civil claims to recover the misappropriated assets.
Prevention is the best cure, and the best way to avoid such problems is to carefully consider the trustworthiness and reliability of any person you intend to appoint as deputy before executing the LPA. It is also prudent to inform your other friends and relatives of this arrangement, so that should you lose mental capacity they may help keep a watchful eye out for any potential abuse.
What shall I do now?
You should definitely consider executing a LPA to protect yourself and your loved ones in case of any mishaps that may suddenly rob you of your mental capacity. The execution and registration of a LPA is a relatively straightforward process, and gives you the assurance that should you lose mental capacity, someone you trust can immediately step forward and make decisions on your behalf.
However, given the broad powers that a LPA confers on your donee(s), you are strongly advised to carefully consider
- a) who you wish to appoint as donee(s) (MUST be trustworthy and competent)
- b) what decisions you wish to empower them to make on your behalf
- c) any limitations and safeguards you wish to put in place on your donee(s)
Do discuss these arrangements with your trusted loved ones so that they are aware of your donee(s) powers and responsibilities, and can work together with your donee(s) should you lose capacity to best take care of you.
I need more help! Where can I get legal advice?
If you require further assistance, you are advised to consult a lawyer who is experienced in these asset management issues. You can also schedule a Quick Consult here to talk to an experienced lawyer for 15 minutes at $49.
Some of the common questions that you can ask a lawyer include the following:
- “I need advice on what powers to grant to my donees, and how I can protect myself from mismanagement.”
- “I wish to appoint a donee who is not a Singaporean citizen, or who does not reside in Singapore. Is this advisable? What do I need to consider?”
- “My donee insists that I am losing my mental capacity and I do not agree. I’m worried he may try to force the issue and manage my affairs without my consent. What should I do?”
This article is written by Ho Yu Xuan.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.