Who will manage your money upon incapacitation?
Cape Town - Legendary actor Bruce Willis has aphasia, and so does one out of every 272 South Africans. This disorder can lead to a cognitive impairment which may leave you legally incapacitated, with serious implications when it comes to your ability to claim against an illness policy. In this scenario, the solution is a Trust. Either that – or you risk having to apply for a ‘curator bonis’ in order for an insurance claim to be paid – a long, costly process.
Dr Helen Weber, Senior Medical Advisor at Sanlam, says, “We don’t talk about cognitive and language disorders such as dementia, aphasia and Alzheimer’s enough. Aphasia affects the ability to communicate – how you write and understand language. It usually occurs after a stroke, brain tumour or head injury. These are all claimable conditions on-the comprehensive severe illness benefit. Importantly, these conditions come with costs and considerations to future care when the need to claim arises.”
The impact on insurance
Dr Weber says, “Medical conditions like aphasia – or any other primary condition that has complications like executive function impairments, impacting memory and reasoning – can mean you lose your legal capacity to act – aka, make rational financial decisions and understand the consequences of these. If this applies to you at a time you claim for a life insurance benefit (income protection, disability and severe illness cover), a legal process must happen, where a curator bonis is appointed by the High Court before the claim can be paid out. This can take up to a year and cost over R150 000 – an exhausting process at a time when you may need the money most.”
Dr Weber shares the following real-life case study. A 68-year-old man went to bed at about 8 pm with a mild headache. He had a stroke and has been in a vegetative state ever since. He is now in a frail-care facility. His family submitted a claim in 2020 for R600 000. They are still waiting for a curator appointment in order to receive the pay-out, over two years later. Until a curator is appointed, Sanlam legally cannot pay out their claim.
Dr Weber adds that when it comes to an income protection claim for a client in this situation, Sanlam now pays up to four months in advance to tide the client and their family over, while they appoint a curator.
What’s the role of a trust?
A trust can help avoid the tedious process of curatorship. Some trusts, like the Sanlam Protector Umbrella Trust Solution, enable clients to give upfront consent for claims to be paid to the trust, should they lose their legal ability to act. This ensures the funds are used in their best interests, should they be unable to make financial decisions. Critically, it eliminates the need for curatorship, and all the costs – emotional and financial – associated with that process.
Unpacking power of attorney and curatorship
When someone is unable to manage his or her finances, a family member or friend could be given power of attorney (POA) to help manage the individual’s affairs. However, there is no enduring power of attorney under South African law, and the POA ends if the person become completely incapable of managing his or her affairs. At this point, the Master of the High Court appoints a third party to act on the person’s behalf – either an administrator or a curator.
What is a Curator Bonis?
This person is appointed by the High Court and set up in terms of common law. They manage the finances, estate, and property of someone who is either physically or mentally incapacitated and unable to make sound financial decisions. Appointing a curator is expensive and intensive; it usually requires medical reports from a psychiatrist and neurologist.
A curator is also needed for estate planning
David Thomson, Senior Legal Adviser at Sanlam Trust: Fiduciary Services, says that with regards to estate planning, a will remains 100% valid even if a person becomes mentally incapacitated and unable to manage their affairs. “However, you won’t be able to create a new will or update the existing one. There is the option to move your assets to a trust before this happens. However, once an illness has set in, your family would have to apply to the high court for a curator.”
Weber concludes, “As ever, our goal is to empower our clients to live with confidence, knowing that their financial foundations are sound, no matter what curveballs may come. We strongly encourage our clients to work with a financial adviser to ensure their needs are holistically met at every life stage.”