Bermuda: Planning For The Future With A Power Of Attorney

Last Updated: 9 November 2012
Article by Michael Mello

Everyone should execute a Power of Attorney ("Power"), an adaptable legal tool that helps you to plan for the future.

A Power is particularly useful in estate planning as it allows you to plan for the possibility of becoming incapacitated and unable to make day to day as well as estate planning decisions on your own behalf.

A Power is a deed by which a person confers power on another to act on their behalf. The person granting the Power is usually called the "Donor" and the person authorised to act on the Donor's behalf is usually called the "Donee" or the "Attorney".

After granting a Power, the Donor can continue to act in his or her own affairs without restriction and the Donee may act when requested to do so or when required due to the Donor's inability to act.

A Power can be general so that the Donee can conduct any sort of business on behalf of the Donor, or it may be limited to one particular transaction, or a series of particular transactions, provided for in the document.

A Power may also be limited in time, remaining in force for a specified period. Powers are frequently granted when a person is going abroad for a long period of time, may be difficult to contact while abroad, or when an important transaction is due to close while the Donor is otherwise unavailable.

The difference between an ordinary Power ("Ordinary Power") and an enduring Power ("Enduring Power") is that an Ordinary Power will terminate automatically if the Donor loses his or her capacity, whereas an Enduring Power will remain valid and effectual during any subsequent legal incapacity of the Donor. In both cases, the bankruptcy of the Donor will automatically terminate the Power -- and the bankruptcy of the Donee could terminate the Power, depending on the circumstances.

Enduring Powers are an essential tool for elderly persons, in particular. However, everybody should, as a matter of good estate planning, make a Power to appoint a Donee to act for them to provide for the possibility that they may become incapacitated accidently or by disease. It is always wise to plan for the future.

An advantage of using an Enduring Power is that it will avoid a court application for Receivership should a person lose their legal capacity when holding assets in their sole name. Without an Enduring Power, the spouse or family members of the incapacitated person will not be able to act on such person's behalf and must apply to the Supreme Court of Bermuda under Part IV of the Mental Health Act 1968 to be appointed as the Receiver of the incapacitated person.

Two types of Enduring Powers are used in Bermuda. The first is the usual Enduring Power, which comes into full effect on the date it is signed by the Donor and remains in force until such time as the Donor revokes the Enduring Power or until the death of the Donor. The second type is an Enduring Power subject to the issuance of a medical certificate. This type of Enduring Power is immediately valid, but does not become effective until such time as the Donor's physician certifies that the Donor is not capable of managing his or her own affairs. It remains effective until such time as the Donor's physician certifies that the Donor is once again capable of looking after his or her own affairs.

Clearly, a Power gives the Donee tremendous power over the affairs of the Donor; for that reason, a Donor should always appoint a person they can fully trust. In situations where the Donor and Donee are related, the Donee will frequently not expect to be paid for work done in pursuance of the Power. However, if there is no suitable relative or friend, a professional person may be appointed but they will expect to be paid as the Donee of the Power. There is no warranty that a professional person will be trustworthy and care should be taken whom you select to act as the Donee of your Power, both from amongst professionals and family and friends.

Powers are usually not necessary if a husband and wife, or parent and child, have all of the assets in joint names. That is because the joint owner will have access to the assets on the incapacity of the other joint owner. Similarly, a Power would not be required if an individual's only assets are monies in a bank for which there is an authorised signatory. However, there is the risk that such a bank authority will be revoked by the subsequent legal incapacity of the account holder and any transaction carried out thereafter would be deemed invalid.

Although it is not legally necessary to register a Power in order for it to be effective, unlimited Ordinary and Enduring Powers are commonly registered because the act of registration serves as public notice that the Power exists and is effective. The registration of, and access by the public to, Powers and other deeds is provided for by the Registrar-General (Recording of Documents) Act 1955. A Deed of Revocation by the Donor revoking a Power should also be registered with the office of the Registrar-General, when the revoked Power is so marked.

As with all complex matters of law, it is sensible to consult an expert in the area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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