A key to enjoying life is cherishing the freedom to act, according to personal choices. But what if one day, you had to emigrate, and could no longer manage your beloved family business? Or what if you develop dementia in old age, and can’t even recognize your children, let alone write a will benefiting them? Basically, what can you do to prepare for an uncertain future?
There are two kinds of legal documents you can create. They ensure that when you are unable to think properly or carry out your usual personal wishes for whatever reason, someone can act on your behalf. Usually, this “someone” would not be a random stranger, but a friend or relative you personally chose, and trust to make choices in your best interests. This provides peace of mind and security. No matter what happens to you or your mind, your personal welfare and possessions will always be managed sensibly.
Now, let’s look at the two kinds of documents. They have different uses, and apply at different times. Hence, it’s important to be clear on which one is more appropriate for you – or even whether you should get both documents made.
What is a Power of Attorney (PoA)
A Power of Attorney (PoA) is a document that lets one appoint someone else to act on their behalf. The one ‘donating’ authority is the donor, and the one receiving the authority is the donee.
Why get a PoA done? In Singapore, the most common scenario is where Housing Development Board (HDB) flat owners are overseas, but want to sell or rent out their property. Because these transactions require 3 in-person appointments at HDB Hub, a special HDB PoA is needed. Other situations include donors who are bedridden or about to enter homes for the aged. They create PoAs allowing their adult children to visit banks and manage bank accounts on their behalf. Even younger people may create them, as they are wary of accidents that could cause them to lose their ability to act for themselves. Lastly, Powers of Attorney can also be made by people about to go to prison.
One must note that when a donor loses mental capacity, the PoA is officially cancelled. All the authority once granted to the donee is now off-limits to them. But – there is a way around this, to ensure continuity in that your best interests are always looked after.
What is Lasting Power of Attorney (LPA)
Just like the PoA, the LPA grants authority to donees to make decisions on behalf of donors. But unlike the PoA, the LPA only kicks in when donors lose mental capacity.
It’s easier to lose mental capacity than you think. A stroke could wipe it out – and you don’t have to be particularly aged to suffer one. Mental capacity is usually lost through dementia as well. Worryingly, Singapore is seeing an ‘alarming’ rise in younger dementia patients. Even more common conditions like depression can erode mental capacity too. Outside of these afflictions, chance occurrences like accidents can also cause loss of mental capacity.
In addition, while a PoA can cover almost any type of legal action, LPAs only authorize actions related to personal welfare, or property and affairs, or both. (The decision is the donor’s/yours.) Personal welfare matters include where you live and eat, and who you can contact. Property and affairs matters include selling property and investing savings.
So far, doesn’t an LPA sound like whipped cream on coffee – not necessary, but nice to have? Well, here are some scenarios illustrating the deep impact of an LPA – or lack thereof – on your future. Let’s say you’ve been hospitalized, and have enough in your Medisave account to pay the bills. There’s just one problem: you lack the mental capacity to sign the Medical Claims Authorization Form, and you didn’t create an LPA authorizing someone else to sign it for you. What happens next? That’s right, no CPF withdrawal for you. Or what if you get into a serious car accident which could merit insurance claims for you, but again, you are mentally incapable of reporting the accident to your insurer and lack an LPA? No prizes for guessing.
You might say that hospitalization and accidents are rare. Well, ageing happens to everyone – and LPAs can smoothen this process significantly. Given that 10% of everyone over 60 years old in Singapore has some form of dementia, and life expectancy of the average Singaporean is 82, an LPA becomes critical to keeping up many people’s quality of life for almost 22 years! Furthermore, dementia is nuanced. Patients may think less clearly at certain times of day. They may be less able to recognize their surroundings, or even count money. In view of such instability, it is prudent to fall back on the certainty of an LPA.
Key Difference Between a POA and LPA
A summary of the key aspects of both documents:
| Power of Attorney (PoA) | Lasting Power of Attorney (LPA) | |
| What is it? | Appoint someone to act on your behalf when you lack “physical” capacity (e.g. emigrating/bedridden) | Appoint someone to act on your behalf when you lose mental capacity |
| Who can create one? | Anyone with the mental capacity to do so | |
| When does it come into effect? | On the date stipulated in the PoA and/or when PoA condition is fulfilled e.g. when you go overseas | When donor loses mental capacity |
| What can donees do on behalf of donors? | General, ‘almost everything the donor himself could do’, or Limited e.g. selling property | Personal welfare and/or property and affairs matters |
When a POA or LPA will be helpful
Here are non-exhaustive lists:
PoA
- About to emigrate, interested in generating rental income from now-vacated HDB / other residence
- About to enter long-term care, bedridden
- About to enter prison
LPA
- Has dependents, especially minors/special needs children, who will be vulnerable in absence of parent/guardian
- Nearing old age – risk of diseases associated with loss of mental capacity much higher
- Has substantial amounts in CPF accounts, want to access them even in emergencies
Spotted yourself, or anyone you know? Ultimately, money and time you invest in both a PoA and an LPA now are likely to yield outsize savings in the future. Why wait?
