Written by: Peter Tsang
Birth, aging, sickness and death are the inescapable parts of life. While many of us are well prepared for the eternal rest by making a will, we often tend to overlook the blurred lines between aging and dying (e.g. when one suffers from dementia and becomes mentally incapacitated), and as such, failed to make proper end-of-life care preparation. This is where EPA comes in.
What is an Enduring Power of Attorney(“EPA”)?
According to the Enduring Powers of Attorney Ordinance (Cap.501 of the Laws of Hong Kong) (the “EPAO”), an EPA allows its donor (the person who wishes to give his/her power of attorney to someone), while he/she is still mentally capable, to appoint and give power to act on his/her behalf to an attorney(s) to take care of the donor’s financial matters in the event that he/she subsequently becomes mentally incapacitated.
Unlike a general power of attorney that will cease to be effective as soon as its donor becomes mentally incapacitated, an EPA will “endure” the donor’s mental incapacity and give the attorney the power to continue the donor’s financial affairs despite such incapacity.
Key advantages of an EPA :
it allows freedom of will;
it avoids expensive and potentially distressing court proceedings for the appointment of another person to look after the individual’s affairs;
it provides an efficient and cost-effective way of administering the individual’s property;
it eases the difficulties and distress that may otherwise be suffered by the donor’s family in managing the donor’s affairs.
The attorney’s capacity
Donor is free to appoint whatever person as his/her attorney. However, an attorney must be:
an individual who “has attained the age of 18 years and is not bankrupt or mentally incapable” at the time when he/she executes the EPA (Section 6(a) of the EPAO); or
a professional trust corporation (section 6(b) EPAO).
Furthermore, the attorney must not be (i) the registered medical practitioner or the solicitor witnessing the signing of the instrument creating the EPA
; (ii) the spouse of the registered medical practitioner or the solicitor; or (iii) a person related by blood or marriage to the registered medical practitioner or the solicitor. (section 5(2)(aa) of the EPAO).
A donor is free to appoint more than one attorney but they must be appointed to act jointly or jointly and severally
(section 15(1) of the EPAO). If the donor does not make an express choice, the EPA will not be valid.
If attorneys are acting “jointly”, it means that they have to act together and cannot act separately. A decision made by any one of the attorneys alone will not be valid. They therefore have to make decisions together in respect of the donor’s assets on agreed terms. On the bankruptcy or death of any one of the attorneys, the power of attorney becomes revoked under the law. Although it is less flexibility for any one attorney to exercise his/her power, this arrangement can prevent one attorney from abusing his/her power.
If attorneys are acting “jointly and severally”, it means that they can act together, but can also act separately if they wish. This would effectively mean that any one of the attorneys will be able to make a decision by themselves. On the bankruptcy or death of any one of the attorneys, the other attorney(s) may still execute the enduring power of attorney. One obvious advantage is of course that there will be more flexibility for any one attorney to exercise his/her power; on the flip side, it may be easier for any one attorney to abuse his/her power.
Duties and liabilities of attorney(s) Section 12(1) of the EPAO emphasizes that an attorney’s duties towards the donor “are of a fiduciary nature”. In a nutshell, that means the attorney is to administer the donor’s assets only for the donor’s benefit. The attorney should not profit from such exercise and must avoid situations where there is conflict of interest between his-/her-self and the donor.
Section 12(2) of EPAO further notes that an attorney under an EPA has the following duties:
(a) to exercise his powers honestly and with due diligence;
(b) to keep proper accounts and records;
(c) not to enter into any transaction where a conflict of interest would arise with the donor; and
(d) not to mix the property of the donor with other property.”
In the event of suspected abuse of power under the EPA, an interested party (e.g. family members) may make a court application for an order that:
(a) require the attorney under an enduring power to produce records and accounts and make an order for their auditing;
(b) revoke an enduring power or vary an enduring power; or
(c) if satisfied that the interests of the donor of an enduring power so require it, remove the attorney.
Attorney’s authority and restrictions
The donor must:
specify what the attorneys’ authority is in dealing with the donor’s particular property or financial affairs. For example, the donor may decide to give his/her attorneys only power over a particular bank account, or a particular piece of property.
The donor may:
place any restrictions he/she likes on the authority the donor gives to his/her attorneys in the EPA.
Please note: Unless the donor includes a restriction preventing it, his/her attorneys will be able to:
use any of the donor’s money or property to make any provision which the donor might be expected to make himself/herself for the needs of the attorneys or the needs of other persons;
use the donor’s money to make gifts, but only for reasonable amounts in relation to the value of the money and property.
The donor must not:
give his/her attorney(s) a general authority over the donor’s property and financial affairs;
give his/her attorney(s) an authority over other affairs apart from the donor’s property and financial affairs; or
give his/her attorney(s) an authority to nominate other person to act as an attorney or to exercise the attorney’s authority;
Signed by the donor
For an EPA to have legal effect, it must be “executed in the prescribed manner by the donor and the attorney”, though “not necessarily at the same time”.
A donor must sign the EPA before a registered medical practitioner and a solicitor. The EPA must be signed by the donor either:
in the presence of both the solicitor and the registered medical practitioner at the same time; or
in the presence of the solicitor only at any time not more than 28 days after is the donor has already signed it in the presence of the registered medical practitioner. (Note: in this case the form must be signed and witnessed by the medical practitioner before it is signed again in the presence of the solicitor).
The definition of “execution” under section 10(3)
EPAO also makes it clear that an EPA remains an uncompleted and useless document unless and until the donor signs it before a solicitor. If there is a time gap between the signing before the medical practitioner and the signing before the solicitor, the EPA is not a valid enduring power of attorney during the time gap. It will not even constitute an ordinary power of attorney during such period.
Certificate by a registered medical practitioner and a solicitor
To order to safeguard against the remote possibility that the registered medical practitioner or the solicitor may exercise undue influence on the donor, section 5(2)(aa)
of the EPAO prescribes that the registered medical practitioner or the solicitor witnessing the EPA cannot be:
the spouse of the attorney;
any person related by blood or marriage to the donor; or
any person related by blood or marriage to the attorney.
Certificate by a registered medical practitioner
of the EPAO specifies that the registered medical practitioner has to be “satisfied that the donor was mentally capable” when signing the EPA. This certification by a registered medical practitioner would also serve to minimize the chance of future challenges to an EPA on the grounds that the donor was already mental incapacitated at the time of executing the EPA.
One should note that this certification is to be given by a “registered medical practitioner”, but that medical practitioner does not necessarily have to be a specialist such as a psychiatrist or neurologist.
Certificate by a solicitor
of the EPAO provides that the solicitor has to certify that “the donor appeared to be mentally capable”
Arrangements for donor who is physically incapable
of the EPAO caters for the scenario where a donor is mentally capable, but physically incapable of signing: “if the donor is physically incapable of signing, any other person, not being the attorney, the spouse of the attorney, the registered medical practitioner or the solicitor before whom the instrument is signed or the spouse of the registered medical practitioner or the solicitor, may sign the instrument on behalf of the donor in the presence, and under the direction, of the donor.”
**The person signing on behalf of the donor must sign under the direction and in the presence of the donor. He/she must also sign in the presence of a registered medical practitioner and a solicitor.
Signed by the attorney(s)
The attorney(s) must sign the EPA in the presence of a witness. The witness must sign the EPA and provide his/her full name and address in the EPA. The witness must not be:
the donor; or
Commencement of the EPA
According to the prescribed forms as set out in Schedule 1
and Schedule 2
to the Enduring Powers of Attorney (Prescribed Form) Regulation (Cap.501A of the Laws of Hong Kong), a donor has the option of having the EPA take effect:
on the date it is signed before the solicitor; or
on a later specified date; or
upon the occurrence of a later event.
If the donor does not specify a date for an EPA’s commencement or an event to trigger its commencement, the EPA will commence upon its execution, that is, when it is duly signed before a solicitor (section 10(3)
of the EPAO). It is therefore essential for the donor to be fully aware of his/her choice for the time of commencement of the EPA.
Registration of the EPA
To further safeguard a donor’s interest, the EPAO prescribes:
under section 4(2): “If the attorney has reason to believe that the donor is or is becoming mentally incapable he must, as soon as practicable, apply under section 9 for registration of the instrument creating the power.”
under section 4(3): “In the event of the subsequent mental incapacity of the donor, the attorney shall not do anything under the authority of the power unless or until it is registered.”
An attorney would therefore be effectively barred from dealing with the donor’s assets before the registration process is completed. The registration system is administered by the Registrar of the High Court of Hong Kong. The system will ensure that a register of every EPA in force will be kept with the Court, which in turn will allow any person to inspect any EPA and thus be able to monitor an attorney’s activity.
One should also note: while the law provides that an attorney must apply for the registration of the EPA upon the donor becoming mentally incapable, it does not mean that the attorney or the donor cannot register the EPA before the onset of the donor’s mental incapacity. In other words, the donor can apply for the registration of the EPA soon after executing an EPA, that is, while he/she is still mentally sound. This would have the benefit of ensuring the registration when the donor is still in control of the matter. Besides, the attorney can start administering the donor’s assets soon after the donor’s mental incapacity without having to apply for registration and to wait for its completion.
Notification of named persons
The donor can nominate person(s) to be notified by the attorney before applying to the Registrar of the High Court for the registration of the EPA. The named person(s) can be:
the donor himself/herself;
any attorneys not joining in the application; or
up to two other persons.
This mechanism would also serve to give some psychological comfort to the donor, by ensuring that persons other than the attorney will become aware of the operation of the EPA upon the donor becoming mentally incapacitated.
If an attorney does not notify the donor or the persons named, that does not prevent the registration of the EPA or make it invalid. However, according to section 19 of the EPAO, in any legal proceedings relating to the EPA the court may, if it considers it appropriate, draw an adverse inference from the attorney’s failure to notify the named person(s).
Section 13 of the EPAO expressly allows a donor to revoke an EPA:
when the donor is mentally capable; or
if the donor recovers from his/her mentally incapacity, makes an application to the Court for the revocation and the Court makes an order confirming the revocation.
Apart from the revocation as initiated by the donor, there are other circumstances which may render an EPA automatically revoked:
on the bankruptcy of the attorney(s);
on the death of the attorney(s);
on the bankruptcy of the donor;
on the death of the donor;
if the Court makes an order to revoke an EPA or to remove the attorney. These sections will be triggered when the Court finds an EPA defective, or when it finds the attorney acting in breach of his/her duties; or
on the appointment of a committee under Part II of the Mental Health Ordinance (Cap.136 of the Laws of Hong Kong).