Mental Incapacitation Planning for Retirees

Retirees often face numerous challenges during their ‘golden years’. While many are living longer, they are not necessarily becoming healthier. One of the risk for retiree is the fear of mental incapacitation such as dementia.

In the year 2012, 1 in 20 persons age 60 and above had dementia. The incident of dementia is expected to more than double[1] in 2030. You can view a video to learn more about dementia located at the end of this page.

The Problems with the Form 1’s Lasting Power of Attorney

A solution is to use Lasting Power of Attorney administered by the Office of Public Guardian. The Lasting Power of Attorney allows you (the donor) to appoint and authorize another person (called the donee) to act on your behalf in the event of your mental incapacitation.  The Office of Public Guardian offers two types of Lasting Power of Attorney namely Form 1 and a customized Form 2.

Form 1 is a template that can be downloaded from their website which is suitable for simple needs such as for those who are young with few assets. The generic Form 1 is not suitable for retirees due to the following reasons:

1. The Form 1 either gives the donees ability to sell ALL (physical) properties or only one (physical) property.
2. With regard to making gifts, the donee may be allow to make cash gifts but it does not specify to whom.

As it can be seen that the template Form 1 is quite inflexible especially those with significant assets.

Another issue with the Form 1 is the potential of having a direct conflict with the donor’s Will. Consider an example in which the donor had made a Will bequeathing a particular property to a beneficiary. He also setup the Lasting Power of Attorney giving blanket powers to the donee in dealing with all his assets including properties. Upon mental incapacitation of the donor, the donee decided to sell the donor’s property in order to use the proceeds for his medical needs. The donee does not know that the property was included in the donor’s will. When the donor dies, the property mentioned in his will is no longer in existence and as a result the intended beneficiary does not get to inherit it.

If the donee knew certain properties cannot be sold, he would have liquidated other assets instead.  To ensure that the donee does not sell specific properties, the donor would have to confer limited powers to the donee.

Restrictions mentioned above can be avoided if you use the customised Form 2 (more on this later).

Another major issue with Form 1 is that if all donees die, becoming bankrupt or become mental incapacitated, none of these donees will be permitted to act on behalf of the donor with regard to property and affairs. In fact, the Lasting Power of Attorney is revoked when this happen. This is the issue with retirees because usually retirees appoint their own spouses as donees who are of similar age.

Mental Incapacitation Planning for Retirees is the solution

I offer the Mental Incapacitation Planning for Retirees as a service to help retirees in their estate plan. Mental Incapacitation Planning for Retirees falls under Professional Financial Planning.  By developing a proper financial plan, the following are the things I would do for retirees:

1. Ensure the donor’s will and Lasting Power of Attorney are not in conflict.
2. To ensure that the donor’s assets can continue to be managed by trusted persons despite all individual donees becoming mentally incapacitated, becoming bankrupt or dies.
3. To ensure donees have sufficient powers to deal with the donor’s assets and yet avoiding the problem of ‘extreme’ powers confer to donees.

The actual work to be done by me are as follows:

1. Fact finding and analysis:
   • Personal particulars and domicile.
   • Understanding the client’s family background such as marital status, dependents, identification of relatives who are suitable donees etc.
   • Create an inventory listing of client’s existing assets.
   • Create an inventory listing of client’s existing debts.
   • Create an inventory of listing of client’s existing insurance policies.
2. Propose the details that are required to meet the objectives of the estate planning exercise using tools such as Wills, Trusts,  Lasting Power of Attorney, CPF Nominations, Insurance Nominations, etc.
3. Implementing the financial plan by coordinating with professionals and ensure the documents are all coherent for:
   • Drafting the wills (legal counsel),
   • Drafting of Lasting Power of Attorney (Form 2 by a lawyer),
   • Drafting of the trust deed (by a commercial trust company).
4. Review the plan. As the saying goes, the only thing in life that is constant is change. When there are changes to the client’s life situation which require changes to the estate plan, I will be able to assist in such changes.

If you are interested about Mental Incapacitation Planning for Retirees, feel free to contact me for an appointment at this link HERE.

[1] According to Minister for Health Mr Gan Kim Yong, there were 28,000 dementia patients in 2012 age 60 and above. The number is expected to rise to 80,000 in 2013. Given that there were 592,700 Singapore citizens and permanent residents in 2012 age 60 and above, the percentage of this segment of this population who has dementia is 4.72% or approximately 1 in 20.

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