Re­cent amend­ments to the Civil Code

Part (II)

Malta Independent - - COMMENT - An­thony Cre­mona

Trusts and LPAs

Need­less to say, trusts play a very im­por­tant role in sit­u­a­tions of in­ca­pac­ity and re­main a very vi­able op­tion for per­sons wish­ing to cater for their pos­si­ble in­ca­pac­ity by ear­mark­ing cer­tain funds or as­sets and set­tling them on trust with a trusted trustee – whether pro­fes­sional (and hence ex­pe­ri­enced and reg­u­lated by the MFSA) or pri­vate – for his or her ben­e­fit dur­ing their life­time and, there­after, for the ben­e­fit of the se­lected ben­e­fi­cia­ries. Trusts can also be set up rel­a­tively quickly and in a sim­ple man­ner (in­clud­ing ver­bally), al­though in prac­tice the process is some­what length­ier.

How­ever, one can­not deny the fact that while a trust in­volves the ac­tual di­vest­ing of own­er­ship by the set­t­lor or cre­ator of the trust and the con­se­quen­tial trans­fer of own­er­ship to the trustee – and there­fore they in­volve a more solemn act – an en­dur­ing or last­ing POA in­volves no such trans­fer of own­er­ship and kicks into ef­fect only upon the in­ca­pac­ity of the grantor.

An en­dur­ing POA is, there­fore, ad­mit­tedly an eas­ier op­tion for the lim­ited pur­pose for which it can be used (con­sid­er­ing that trusts can be used more broadly and for many other pur­poses than an EPA can). With ad­e­quate plan­ning, of­ten trusts and LPAs are used to­gether in or­der to cater for dif­fer­ent as­pects, with the LPA be­ing used to reg­u­late the ‘care’ as­pects and the trust used to reg­u­late the pro­pri­etary di­men­sion.

Es­sen­tially an En­dur­ing Power of At­tor­ney – or a ‘man­date given by a per­son in an­tic­i­pa­tion of his in­ca­pac­ity’ as the law refers to it – is a man­date given by a per­son of full age – and who must, nec­es­sar­ily, have the re­quired le­gal ca­pac­ity, in an­tic­i­pa­tion of his in­ca­pac­ity, to a man­datary, for the lat­ter to take care of the manda­tor or to ad­min­is­ter his prop­erty. Typ­i­cally, over­seas, EPAs are used to al­low the at­tor­ney/man­datary to pay the grantor’s bills, to sell his prop­erty or in­vest­ments and to op­er­ate his bank ac­counts. How­ever EPAs are also com­monly used to al­low the at­tor­ney/man­datary to make de­ci­sions about the grantor’s med­i­cal treat­ment

For­mal­i­ties

A per­son who qual­i­fies and wishes to set up an EPA must have a no­tary pub­lic draw it up, in the pres­ence of two wit­nesses, on pain of nul­lity. How­ever, since the main pur­pose of the EPA is the ‘an­tic­i­pa­tion of in­ca­pac­ity’, there is an ad­di­tional re­quire­ment, be­ing the pro­cure­ment of a med­i­cal dec­la­ra­tion clearly in­di­cat­ing that the En­dur­ing Power of At­tor­ney is in fact ac­tu­ally re­quired, and is con­sid­ered to be in the best in­ter­ests of the per­son for whom it is be­ing drawn up.

Fol­low­ing this, the En­dur­ing Power of At­tor­ney must also be reg­is­tered with the Di­rec­tor of the Pub­lic Reg­istry for it to have le­gal ef­fect, in the same way as notes of trans­fers of own­er­ship of im­mov­able prop­erty, notes of acts of em­phy­teu­sis, notes of pub­lic or se­cret wills, notes of mar­riage con­tracts, sep­a­ra­tions of prop­erty be­tween spouses, or par­ti­tions of im­mov­ables, notes of ap­pli­ca­tions for a Euro­pean Cer­tifi­cate of Suc­ces­sion and of the is­suance thereof, are reg­is­tered with the Di­rec­tor. Over­seas, LPAs need not be reg­is­tered im­me­di­ately (al­though it is usu­ally rec­om­mended to do so in case there are any er­rors, in or­der for these to be able to be rec­ti­fied be­fore it is too late), but by cross re­fer­ring to the reg­is­tra­tion of the above acts, it would seem that the EPA must be reg­is­tered within 15 work­ing days from the date of the act.

The de­ter­mi­na­tion of the start and end pe­riod of an En­dur­ing Power of At­tor­ney both de­pend on the el­e­ment of ‘ca­pac­ity’. The ca­pac­ity re­quired for ex­e­cu­tion as well as that re­quired for re­vo­ca­tion are the same. There­fore, if the manda­tor re­gains men­tal ca­pac­ity, the En­dur­ing Power of At­tor­ney may be re­voked on the pre­sen­ta­tion of a sworn med­i­cal cer­tifi­cate con­firm­ing that in­ca­pac­ity has ceased, as well as a pub­lic deed con­firm­ing ter­mi­na­tion drawn up in ac­cor­dance with the nec­es­sary re­quire­ments.

Who to pick as at­tor­ney

Clearly, just as the choice of a trustee is a very del­i­cate mat­ter, a grantor should only ap­point a per­son that he can trust as his at­tor­ney – the fol­low­ing cat­e­gories of per­sons could be con­sid­ered: Trusted fam­ily mem­bers or long stand­ing friends, pro­fes­sional ad­vi­sors asuch as lawyers, no­taries or ac­coun­tants. Prac­ti­cal con­sid­er­a­tions such as ge­o­graph­i­cal prox­im­ity as well as the avail­able time, skill and ex­per­tise of the at­tor­ney should also be con­sid­ered in re­la­tion to what the at­tor­ney may be ex­pected to do.

Safe­guards against pos­si­ble abuse

Ul­ti­mately an at­tor­ney is con­sid­ered to be a fidu­ciary at law and there­fore all the safe­guards that ap­ply to man­dataries gen­er­ally would also ap­ply to a man­datary un­der an EPA. Mal­tese law specif­i­cally ap­plies to the man­datary of an EPA the pro­vi­sions deal­ing with the obli­ga­tions of a man­datary of a nor­mal POA (thereby im­ply­ing that the other pro­vi­sions ap­pli­ca­ble to man­date do not, how­ever, ap­ply). In par­tic­u­lar, in case of non-per­for­mance the man­datary is an­swer­able for dam­ages and in­ter­est. Fur­ther­more, the man­datary is an­swer­able not only for fraud, but also for neg­li­gence in car­ry­ing out the man­date, al­though li­a­bil­ity in re­spect of neg­li­gence is en­forced less rig­or­ously against a man­datary act­ing gratu­tiously than against one re­ceiv­ing a re­mu­ner­a­tion.

In terms of Mal­tese law, per­for­mance of an EPA is con­di­tional upon the oc­cur­rence of the in­ca­pac­ity and only af­ter the nec­es­sary ap­proval of the court of vol­un­tary ju­ris­dic­tion is ob­tained on ap­pli­ca­tion of the man­datary. This means that for as long as the grantor re­tains his men­tal ca­pac­ity, al­though he may have granted an EPA, this re­mains with­out ef­fect and can­not be used – it only kicks in once the grantor loses men­tal ca­pac­ity and the court of vol­un­tary ju­ris­dic­tion ap­proves its use.

It is not clear from the law whether the man­datary must ap­ply to the court of vol­un­tary ju­ris­dic­tion be­fore ex­er­cis­ing each act in terms of the EPA (which would make it some­what im­prac­ti­cal and more akin to a cu­ra­tor’s role, al­though, on the other hand, it would pro­vide more se­cu­rity), how­ever the law does give the Court the power to im­pose

“those [sic. Such] con­di­tions that it may deem nec­es­sary.”

The law does not place any qual­i­fi­ca­tions on the man­datary but it would seem that mi­nors (who can, oth­er­wise, be ap­pointed as man­dataries un­der nor­mal POAs) may not be ap­pointed to act see­ing that the pro­vi­sion per­mit­ting this was not made ap­pli­ca­ble also to EPAs.

Con­clu­sion

En­ter­ing into an En­dur­ing or Last­ing Power of At­tor­ney is a rel­a­tively easy al­ter­na­tive to cer­tain other forms of fi­nan­cial man­age­ment. Fa­mil­iaris­ing one­self with the con­cept of EPA/LPAs is ben­e­fi­cial to all as many per­sons mis­tak­enly think that if they were to lose their men­tal ca­pac­ity a fam­ily mem­ber would au­to­mat­i­cally be able to con­tinue mak­ing le­gal, med­i­cal and other de­ci­sions on their be­half – or al­ter­na­tively they fear that in such cir­cum­stances all is lost and that un­less they get into com­plex and pos­si­bly costly trust struc­tures, there is no hope. How­ever in re­al­ity this is not the case. Through an En­dur­ing or Last­ing Power of At­tor­ney one is now able to en­sure con­ti­nu­ity of man­age­ment of one’s af­fairs, hence re­duc­ing the risk of fu­ture fi­nan­cial and other hard­ship.

END OF PART 2 Dr Cre­mona is a part­ner of, and heads, the Trusts and Foun­da­tions Depart­ment of GANADO Ad­vo­cates. He is a lec­turer on the sub­ject of trusts, foun­da­tions and fidu­ciary obli­ga­tions at the Univer­sity of Malta and is also Chair­man of the So­ci­ety of Trusts and Es­tates Prac­ti­tion­ers (STEP), Malta branch. Dr Cre­mona is in­debted to­wards Ms Bettina Gatt for her as­sis­tance in pre­par­ing this piece.

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