Following on from my recent post ‘Why is it Important to Make a Will’ I thought a post that serves to highlight financial problems that can arise in cases of incapacitation or severe ill health would be helpful and the logical next step.

Ill health and incapacitation is unfortunately part of life. People are living longer now than ever before, and often the last years of a person’s life is characterised by mental incapacitation. It is important to realise the problems mental incapacitation can cause on a person’s finances and that of their dependents, and to learn how these problems can be overcome.

What happens if someone becomes mentally incapacitated?

If someone in Ireland becomes mentally incapacitated (for example, because of illness, disability or a progressive degenerative illness), all of their assets and property are normally frozen and cannot be used by anyone else unless they are jointly owned.

There are many ways in which a person might lose mental capacity, such as through

Alzheimer’s disease
Dementia
Stroke

According to the Irish Health (http://www.irishhealth.com/article.html?id=13433&ss=alzheimer)

• 38,000 people in Ireland with suffer with dementia, with the number expected to rise dramatically unless there is a medical breakthrough.
• Dementia can affect younger people; currently approximately 4,000 people in Ireland under the age of 65 have Younger Onset Dementia.
• According to leading experts in the field, due to Ireland’s rapidly ageing population, the number affected by Alzheimer’s and related dementia is predicted to rise to 58,000 by 2021 and to 104,000 by 2036.

If someone is unlucky enough to lose their capacity through illness or accident and they do not have an Enduring Power of Attorney in place, they could end up as a Ward of Court. The Ward of Court process is court based and everything that is done for someone under that process is done by application to the Wards of Court Office. It is therefore very time consuming and can be very expensive.

Solution

The freezing of assets until the Ward of Court process is finalised is likely to cause financial difficulties. An alternative to the Ward of Court process is to ensure that an Enduring Power of Attorney has been created. An enduring power of attorney is a legal device which gives you the opportunity to appoint someone who will look after your personal and financial affairs IF you become unable to do so by reason of mental incapacity at some point in the future. It is important to realise that the Power of Attorney is only valid or effective if you lose your mental capacity at some point in the future.

The advantages of establishing an Enduring Power of Attorney is that;

1. You have control over who will be responsible for looking after your financial affairs should it become necessary,
2. You have control over who will be responsible for caring for you should it become necessary,
3. You choose who you appoint as your attorney and you choose what level of authority they exert,
4. You can help avoid a costly legal process and any family disputes that can arise from such processes
5. Gives peace of mind by providing a mechanism for the management of the donor’s affairs in the event that the donor becomes incapable of doing so themselves in the future.

The purpose of this blog is to provide some pause for thought, and to highlight some considerations when considering estate planning. It is not intended to be complete, and you should ensure you enlist professional estate planning and legal advice, particular to your own situation.

For further information, or to seek advice in relation to estate and tax planning, please don’t hesitate to contact Gilmore Insurance & Financial Services. www.gifs.ie