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July 2014
Financial Capacity in the event of Mental Incapacity
Most people assume that having some insurance is enough planning. However, we should ask ourselves if the insurance payout would be easily accessible should we lose our mental capacity. We could lose our mental capacity regardless of age, through accidents, neurological diseases or other causes. This month we look at how a Lasting Power of Attorney may complement our financial planning.
Financial Capacity in the event of Mental Incapacity
Mr Unlucky met with an accident and is in a coma. He has an accident policy that would cover his medical costs. However, as this is not a Death claim, he faces two potential problems.
Potential Problem 1: He is unable to sign the claim document in order to receive the insurance payout.
Potential Problem 2: The insurance cheque will likely be made to him to be deposited to his bank account. However, his family will not have any access to the money for his medical bills since they cannot withdraw from his account.
A person who becomes mentally incapacitated will likely face the same problems.
Solution: Register a Lasting Power of Attorney (LPA)
What is an LPA: It is a legal document that a person who is at least 21 years old (donor) can voluntarily appoint one or more persons (donee[s]) to make decisions on his behalf should he lose the capacity to make his own decisions. Donee(s) may be appointed to act in two broad areas – personal welfare and property & affairs matters.
How the LPA works:
How to register an LPA:
If Mr Unlucky had appointed a Donee using the LPA, his Donee would then be able to make the claim and receive the payout on his behalf, to be used for his medical bills. Registering an LPA, allows Mr Unlucky to choose a trusted person to make decisions for him, giving him certainty and a peace of mind for himself and his loved ones.
