Recent amendments to the Civil Code
Enduring or Lasting Powers of Attorney that survive incapacity
Not many people ask themselves what might happen if one day they were to become mentally incapable and thus lack the capacity to enter into any form of contract. Who would take care of them and how would they continue to administer their property? How will doctors and medical fees be paid? Residential care also, maybe.
The benefits of drawing up a will in order to provide for persons after one’s death and the winding up of one’s affairs are widely recognised. However, with the risk of supervening mental incapacity, with the advent of longevity (and the possibility of illness or accident), in the midst of hectic schedules, the opportunity to plan ahead of time for future happenings is one that should not be overlooked. There may come a time in a person’s life when one will no longer be able to manage one’s own affairs, and would thus need another person to do so for them. The Alzheimer’s Association of the United States estimated in 2015 that one in nine people over the age of 65 suffers from Alzheimer’s (being the most common cause of dementia) with the figure going up to one in three for the over-85 age bracket.
Whereas ‘powers of attorney’ – or mandates (‘prokura’ in Maltese) – have been around for centuries (ever since the time of the Romans) and are therefore concepts that we are well familiar with, the so-called ‘Enduring Power of Attorney’ – or ‘Lasting Power of Attorney’, as it is also known in England – on the other hand, has only recently been introduced through Article 1864A of the Civil Code.
This states that a person of full age (being the mandator) may now give a mandate to another person (being the mandatary) in anticipation of incapacitation. The law speaks of an appointed mandatary in the singular, suggesting that joint or several attorneys cannot be appointed under Maltese law, which is unfortunate because having more than one attorney generally provides less opportunity for abuse and exploitation than having a single attorney appointed (not least because it also permits a combination of attorneys to be appointed, such as a family member and someone independent of the family, or possibly having a different attorney appointed for different aspects of the LPA – such as the property aspect, and the care and welfare aspect).
Significance of the EPA/LPA
Prior to the introduction of EPAs, a mandate or ‘prokura’– which is a contract whereby a person gives to another the power to do something for him – would typically terminate once the person granting it loses mental capacity. This rendered them totally useless in the context of the incapacity of an elderly person, for instance – just when they are most needed.
As a consequence, in response to the above questions, before the introduction of the new Article 1864A, the appointment of an attorney post incapacitation – or the continued use by an attorney of a POA post incapacitation - could not take place, and a lengthy process stood in the way, requiring the family members of the incapable person to apply to court to demand the incapacitation of the person concerned and the appointment of a curator.
This process was often a cause of anxiety for the family members because of the stigma that a declaration of incapacity tended to bring with it – besides, the process can be cumbersome, costly and also takes away from the grantor the possibility of involving himself in the selection of who administers his assets.
Post-Article 1864A, this whole process can now be avoided through the simple preparation of a pre-planned Enduring Power of Attorney, the main benefit of which is that unlike the normal POA, the EPA does not terminate on the incapacity of the grantor.
The whole concept of the Enduring Power of Attorney revolves around the fact that a person of full age (and capacity, at the time the EPA is drawn up) is given the facility to appoint someone whom he considers to be trustworthy to act on his behalf, take care of the administrator, and administer his assets, in the event of the grantor becoming unable to do so himself - it can be used as a form of ‘insurance’ against one’s incapacity; as a form of precaution.
Therefore, by means of an EPA, a person, in anticipation of losing his mental capacity, is given the opportunity to ‘tailor make’ conditions or restrictions via a person of his choice to ensure that future decisions which may need to be taken, in relation to, for example, the administration of his property and/or finances, will be taken care of according to his wishes.
Scope of the EPA/LPA: property administration and care of the grantor
Historically, in common law countries, the Lasting POA replaced the Enduring POA that was narrower in scope. While the former EPA was simple to administer, it failed, however, to provide for some decisions that may have to be made in circumstances where the person concerned does not have the mental capacity to be able to make them himself. In particular, with the EPA, the attorney’s powers were largely restricted to money and property decisions, and were not related to decisions on medical matters such as the continuation or otherwise of life-sustaining treatment, or welfare matters such as a move to a different kind of accommodation. Insofar as the relevant Maltese provision empowers the mandatary to “take care of the mandator or to administer his property” it would seem that the Maltese instrument is more akin to the broader LPA than the narrower EPA.
It would seem, therefore, that the Maltese EPA can be used both in respect of property administration matters, such as the administration of a bank account, the payment of bills, the buying or selling of investments or the purchase or sale of a property, as well as matters relating to the care of the donor, such as the type of health care and medical treatment, residential care, as well as day-to-day matters such as the grantor’s diet and daily routine. Ultimately, whether the Maltese EPA will also cover life-sustaining treatment will depend on how broadly or narrowly the courts will interpret the “care of the mandator.”
END OF PART 1 – in Part 2 we will explore how trusts and Lasting Powers of Attorney can complement each other. We will also examine the formalities that must be satisfied in order to validly issue a Lasting Power of Attorney as well as the safeguards that exist against possible abuse by the attorney.