Finance and Legal
Why are there disputes about validity of Will? How to avoid? How to protect my parents with dementia or adult children with special need against financial exploitation? Is general power of attorney valid when someone becomes mentally incapacitated?
Special needs financial planning:
Let’s check out how the following ”tools” can help prepare ourselves and protect the legal and financial interest of our family members who are mentally-Incapacitated.
A Will is arguably the most important legal document to make when we are smart! Not only can a will legally protect your spouse, children, and assets, it can also spell out exactly how you would like things handled after your death.
3) Part II of MHO
If a person is unable to manage and administer his finances due to mental incapacity, the family members can apply to High Court to appoint a Committee under Part II of the MHO.
2) Enduring Power of Attorney (EPA)
EPA allows the Donor to give directions regarding his property and financial affairs to an Attorney, and such document will NOT expire upon the Donor becoming mentally-incapacitated.
4) Special Needs Trust (SNT)
Individuals with special needs have legal right to own assets, however, it is difficult for them to manage the assets on their own. SNT provides reliable trustee to take care of financial matters for person with special needs after their parents pass away.
A Will is a document which sets out how a person’s assets are to be distributed after his or her death. The person making the Will is called the “testator”.
Any person over the age of 18 and possesses mental capacity may make a will in Hong Kong. The mental capacity to execute a Will refers to ”Testamentary Capacity”, meaning that the testator has the ability to:
Understand nature of the act and its effects
Not have disorder of mind that would poison his affection, pervert his sense of right or prevent the exercise of his natural faculties.
Understand the extent of property of which he is disposing
Be able to comprehend and appreciate claims to which he ought to give effect
If the Will appears to be properly executed and rational, the court will assume that the Testator was of sound disposing mind when he made his Will. If there is any reason to doubt the Testator’s mental capacity, it is prudent to have a medical doctor assess and certify that the Testator has the relevant mental capacity when he gives instructions and executes the Will.
Although you can make a Will by yourself, it is advisable to seek help from a solicitor. This will save time and legal costs should it be necessary to prove (after your death) your intention and mental capacity at the time you prepared and signed the Will. A well-drafted Will can also minimize potential disputes among your family members and inheritors.Although you can make a Will by yourself, it is advisable to seek help from a solicitor. This will save time and legal costs should it be necessary to prove (after your death) your intention and mental capacity at the time you prepared and signed the Will. A well-drafted Will can also minimize potential disputes among your family members and inheritors.
The advantages of making a Will If a person makes a Will, he can:
- Arrange how his assets will be shared amongst relatives other than according to the law of intestate
- Leave assets to beneficiaries who are not related to him, e.g. friends and charities
- Appoint executor(s) to manage and distribute the assets.
You may also have the following questions relating to making Will:
- What are the differences between an estate with a Will and an estate without a Will?
- Under what circumstances can a Will be revoked? What are the formalities of making a Will?
- What other matters should be considered before making a Will?
- I have lost all my love and affection for my wife. I plan to leave nothing to her without even mentioning her name in my Will. Can I do that?
Enduring Power of Attorney (EPA)
Enduring Power of Attorney (EPA) in Hong Kong allows the Donor to give directions regarding his property and financial affairs to an Attorney, and such document will not expire upon the Donor becoming mentally incapacitated.
For an EPA to have legal effect, it must be made out in the “prescribed form” as required by the Ordinance. If you plan to make an EPA, first consult a lawyer to fill in the Form, followed by signing it before a registered medical practitioner who will certify your mental capacity, then before a solicitor no more than 28 days apart.
When signing the EPA, the Donor must have the mental capacity to understand the following:
The Attorney would be able to assume complete authority over his affairs
the Authority will continue if he should be or become mentally incapable
The Attorney would be able to do anything with his property which he himself could have done
If Donor becomes mentally incapable, power will be irrevocable even without confirmation from the court.
Part II of the MHO
If a person is unable to manage and administer his finances due to mental incapacity (referred to as “MIP”), the court has the power to appoint a Committee to manage his finances and affairs under Part II of the MHO. A Committee may be necessary where no EPA has been executed or where the Attorney under an EPA was given insufficient power to manage the MIP’s assets.
In appointing a Committee under Part II of the MHO, the court must be satisfied that a person is, by reason of mental incapacity, unable to manage and administer his property and affairs at the time of application. The applicant must include inter-alia, two recent medical certificates signed by registered medical practitioners, one of which must be from an approved doctor under section 2(2) of the MHO, certifying his mental incapacity. Application of Part II of MHO is a High Court procedure, you are strongly advised to consult a lawyer with relevant experience.
Special Needs Trust (SNT)
Special Needs Trust Office has been established in Dec 2018 to provide a trust service for parents/relatives who have family members with special needs.
This is an affordable trust, with the Director of Social Welfare as trustee, specifically for Hong Kong residents with special needs. The trust provides financial security for them after their parents/ carers have passed away.
MIP Care Resources Connect is a charitable organisation founded in 2019. The main objectives of MIPCRC are twofold: first, to provide a web-based platform to provide information and resources for carers and professionals to mentally incapacitated persons; and second, to promote awareness of the issues surrounding mental capacity. As a carer charity in Hong Kong, we share a common vision of finding ways to support carers in their laborious routine of caring for family or friends who are incapacitated.