Question

I am concerned that my mother is showing early signs of dementia. She has several rental properties that provide her with the bulk of her income and these need to be actively managed. Should I go and get a power of attorney so that I can look after her finances?

Answer

If your mother is mentally incapacitated, she will not be able to enter into any future lease agreements on her rental properties and this could cause problems.  However, getting a power of attorney will not help you in this instance as the power of attorney will fall away as soon as your mother is declared to be mentally incapacitated.

There are other routes that you could follow, and I would certainly recommend that you contact a lawyer so that the correct structure may be put in place to both look after your mother and her financial interests.

There are three main structures that are typically used in these circumstances, and I’ll give you a quick overview of them to enable you to ask the lawyer the right questions and come up with the most appropriate solution.

• Appoint an administrator

You can apply to the master’s office to have yourself appointed as the administrator of your mother’s affairs. The master would typically look for a recent report from a psychologist as well as her GP who would both need to confirm that she is no longer capable of managing her own affairs.  The master would also appoint an investigator to look into her situation. 

If all goes well, you should be appointed her administrator within six months and would be able to manage the day-to-day running of her financial affairs.  You would need the master’s approval should you wish to sell any immovable property or shares.

• Appoint a curator bonis

Here the High Court would appoint a curator to manage your mother’s affairs.  As this would require a High Court order, it would be more expensive than the first option.  It usually takes about a month to get the court order and up to six more to get the curatorship granted by the master.

• Set up a trust for your mother

You could set up trust for your mother to manage her finances for her. I would recommend setting up a special trust rather than a normal trust as the special trust will be taxed at your mother’s personal rate rather than the much higher rate of tax that is levied on normal trusts.  However, the special trust must only benefit your mother so you cannot add other beneficiaries to the trust.

If you decide to go this route, you would need some specialist help in getting the money into the trust to ensure that it is done tax efficiently.

Insider tip

If your mother has early onset dementia it is important that any financial transactions she does (like updating her will) are certified by a specialist who can confirm that she is mentally capable of making these decisions. You do not want to have any of these issues contested once your mother has passed away.

As we are living longer, the likelihood of us or a close relative getting dementia is increasing.  It is important that we put the right structures in place to ensure our finances can be properly managed when we are not able to manage them personally.