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Dementia: Understanding Your Legal Options With Property Transactions & Management


"Dementia is the plague of our time, the disease of the century" (Unattributed)

Dementia is a widespread medical condition that affects people of all ages but particularly the elderly and includes conditions like Alzheimer's. One of the most significant challenges of dementia is the loss of mental capacity, impairing someone's ability to act rationally or to understand the consequences of their decisions. This makes it difficult for individuals to make crucial decisions, including those related to their legal and property affairs, finances, and care. 
This can be particularly problematic when family members are unprepared or unaware of the practical and legal implications.
1. Beware the "Power of Attorney" myth.
In the normal course of business, any healthy person may be briefly unable to fulfil certain legal actions. In these cases, a written power of attorney (PoA) can provide a solution as it empowers someone to act on behalf of another person and specifically with the person's estate or financial affairs.
One common misconception is that a signed PoA can authorise a family member to take control of the individual's financial affairs in perpetuity - i.e. when his or her dementia worsen and the person becomes incapable of acting on their own behalf. In fact, a PoA is only valid if the person who granted it maintains "legal capacity", in other words an understanding of its implications. When dementia kicks in, the PoA automatically becomes invalid as South African law of agency dictates that a power of attorney ceases to be valid when the grantor becomes mentally incapacitated.
Enduring Powers of Attorney, which continue even after someone loses legal capacity, are valid in some countries but are unfortunately not yet recognised in South Africa.
2. What is the effect of an expired PoA on an estate agent's mandate to sell a property?
This may put the estate agent in a predicament. For example, if a person gave someone a power of attorney to sell their property while they were healthy, but the transaction took place after the principal's mental capacity had been impaired (in other words they would not have been able to make the decision themselves) the transaction would be unlawful. South African law does not recognise enduring power of attorney.
If the estate agent was aware that the principal's mental capacity was impaired, but continued with the transaction, their actions would be illegal and can amount to fraud, and they may be held liable.
3. So, what are your legal alternatives for dealing with dementia?
You will typically have three legal options available -
3.1 Curatorship: In terms of common law and the Administration of Estates Act of 1965, this involves appointing a curator bonis through a High Court order to manage the financial affairs of the person with dementia (a curator ad personam may in rare cases also be needed to manage the person's personal affairs). This process can be lengthy, complex and expensive (about R80 000), but in some cases, it may be the only viable option available. The High Court will require reports from a curator as well as two medical practitioners - one of them a psychiatrist. The curator, who is usually an admitted attorney accountant or other like professional, is entitled to annual fees as well as a termination fee when the curatorship comes to an end. The curator takes full control of all assets (including property) and expenditure of the person under his curatorship and reports annually to the Master of the High Court. 
3.2 Administration: Similar to curatorship but less complex, less expensive, and quicker, this involves an application to the Master of the High Court for the appointment of an Administrator. Where the condition is permanent, an interested party can apply for the appointment of an administrator or curatorship. It is only available when your family member is a "mentally ill person or person with severe or profound intellectual disability", which excludes cases of purely physical frailty or disability, and suggests that in cases of mild dementia or mild cognitive impairment only curatorship is an option - but take legal advice on your specific circumstances. An interested party would usually be a spouse, child or a partner in a business, but can be anyone with an interest in the individual's financial affairs. The Master is usually comfortable to appoint a family member as administrator.
An extra element of cost and delay applies in larger estates, in that the Master must commission an investigation into any application where the assets involved are over R200,000 and the annual income is over R24,000 p.a. 
3.3  Special Trust: An alternative option is to consider a trust or special trust, which can be established if your family member suffers from an early onset of dementia but is still lucid and has legal capacity. All trusts have advantages in that they allow individuals the freedom to choose upfront who the trustees will be and what powers and duties they will have, whilst special trusts come with significant tax benefits over ordinary trusts. Individualised professional advice is essential here.
4. Role of Curator Bonis and Administrator in terms of property management or transactions
4.1 Curator
The High Court, in whose jurisdiction the person concerned lives or in which they own property, appoints after an application by an interested person (such as a family member), a curator bonis to perform or execute a particular act on his/her behalf in respect of his/her property or to manage or look after the person's property.
Regarding immovable property of the mentally incapacitated person, section 80 of the Administration of Estates Act, 66 of 1965 stipulates that the curator bonis shall not alienate or mortgage any property that he/she has been appointed to administer unless he/she has been authorised thereto:
4.1.1          by any will or written instrument by which he/she has been appointed as executor; or
4.1.2          by the Master of the High Court where the value of the particular property to be alienated does not exceed the amount determined by the Minister from time to time by notice in the Government Gazette (currently R100,000) and if the alienation would be in the interest of the mentally incapacitated person (section 80(2)(a) of Act 66 of 1965); or
4.1.3          by the High Court where the value of the immovable property concerned exceeds the amount determined by the Minister from time to time by notice in the Government Gazette (currently R100,000).
4.2 Administrator
According to The Mental Health Care Act, 17 of 2002, the Master of the High Court may appoint an Administrator to manage the property of someone who is mentally incompetent. In terms of section 63(4)(a) of the Mental Health Care Act, an administrator may not alienate or mortgage any immovable property of the person for whom he or she is appointed, unless authorised to do so by a court order or with the consent of the relevant Master of the High Court.
Since no High Court application is required for the appointment of an administrator, the procedure for the appointment of an administrator is far less costly than the common law appointment of a curator bonis. The applicant does not need to work through an attorney, and the application fees charged by the Master in processing the application are minimal, amounting to no more than R2500.
Administrators, like curators, are governed by the Administration of Estates Act and are entitled to their fee of 6% on income from assets and of 2% of the value of the capital when the administration is terminated.
Once the individual dies, the curatorship or administration terminates, and the management of the personal and financial affairs are then handed over to the Executor of the deceased's estate who will take control of the assets and property of that person. 
Understanding the available legal avenues can help the person who has been diagnosed to navigate this difficult journey, and with proper planning, personalised legal advice, and early action, he or she can ensure that his or her family member's legal and financial well-being is always protected.
Where someone is diagnosed with an illness that will have an impact on their mental capacity in future, it is important to involve the person in the decision-making process while they are still healthy. In such instances the person could make their wishes known about the potential future appointment of an administrator or curator. It is also important to update the will as there may come a time when it is no longer possible to change the will.
Before making any major changes, potential caregivers (family members) need to inform themselves about the condition through resources such as the Alzheimer's SA website, DementiaSA website, as well as information from doctors. Equally important, they must sit down and discuss the diagnosis and its implications with the loved one who has been diagnosed.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
Author Jooste Heswick Attorneys / Lawdotnews / Shindlers Attorneys
Published 09 Oct 2023 / Views -
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