In matters of contracts, investments, and finances, contractual capacity is lost as soon as an individual no longer appreciates the nature and consequences of what they are signing. This loss of capacity places enormous pressure on the primary caregiver and makes managing financial and administrative affairs extremely difficult, particularly where the person diagnosed with Alzheimer’s or dementia has always been the one handling the household finances.
Below are some of the most common questions we receive at Stone Wealth Management regarding mental incapacity and its impact on financial affairs:
1. Can I continue to act under a General Power of Attorney once an individual loses mental capacity?
No. A Power of Attorney becomes invalid once the person who granted it is no longer mentally capable of understanding its implications. It is therefore only useful in the early stages of dementia. Continuing to act on an invalid Power of Attorney can expose the person relying on it to legal disputes and claims, especially in situations where family tensions arise.
South African law does not yet recognise what is known in other countries as an “Enduring Power of Attorney.” If introduced, such a power would allow one to continue acting even after the grantor’s loss of capacity, however, that legal mechanism does not currently exist in South Africa.
2. Will I be able to withdraw funds or make changes to my spouse’s investment or bank accounts if he/she is of diminished capacity?
Unfortunately, not. As mentioned above, once the Power of Attorney falls away, you cannot transact on their behalf. The next step is to apply to the High Court for the appointment of a Curator to manage their financial and administrative affairs.
3. What is the difference between “Administration” and “Curatorship”?
(a) Administration
Administration applies to individuals with assets of less than R200,000 and income of up to R24,000 per year. It is a relatively straightforward process and does not require a High Court application. The appointment is made through the Master of the High Court.
Should one have assets and income over this amount, the Curatorship application will need to be considered.
(b) Curatorship
For larger estates or more complex circumstances, the High Court may appoint a Curator to take over and manage the person’s affairs. The application follows a three-stage process:
- Appointment of a Curator ad litem to manage the court proceedings on behalf of the patient.
- A judicial declaration that the person is of unsound mind and incapable of managing their own affairs.
- Appointment of one or both of the following :
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- Curator Bonis – to administer the person’s property, including their finances; and
- Curator Personae – to make personal decisions such as accommodation or medical consent.
Curatorship applications are time-consuming and costly and require medical reports from two practitioners, one of whom must be a psychiatrist.
4. Can I be appointed as the Curator Bonis over my spouse’s affairs?
It is unlikely. The Master of the High Court treats these matters with great seriousness and understandably so. Removing a person’s contractual status is an extraordinary intervention, and the potential for abuse is significant.
It is therefore necessary to follow a stringent process to safeguard against abuse. The High Courts will generally only appoint an Attorney who has significant experience in this type of role and who has a proven track record with the Master relating to other Curatorships.
Planning Ahead- Steps to take before capacity is lost
a) Ensure practical access to cash flow while capacity remains. Confirm that debit orders are correctly set up and consider transferring necessary funds to your spouse.
b) Create a care budget and liquidity plan. Map anticipated care costs, maintain cash buffers, and plan for asset liquidation that won’t force poor-timed asset sales.
c) Keep Wills current. Once capacity has been diminished any new Wills signed thereafter are no longer valid.
d) Consider a Testamentary Trust in your Will that activates on the first spouse’s death for the survivor. The surviving spouse can act as a Trustee until they become incapacitated, at which time successor trustees, named in the Will, can step in to manage the Trust.
e) Consider whether an inter vivos trust is appropriate if one spouse’s cognition is declining. (Trust suitability depends on facts and tax implications). This allows you to appoint people that you trust to manage your assets in your best interest without the limitations of a Power of Attorney or having an application of Curatorship brought through the High Court.
f) Discuss roles early. Identify who is willing and suitable to act (family vs independent professional) and document preferences.
We can facilitate the legal interfaces (with your attorney) and align the portfolio and cash-flow plan with whichever appointment route proves appropriate.
With the right structures in place, families can focus on care and connection, not crisis management.