Nobody likes to think about a family member losing capacity and becoming unable to manage their affairs. However, as RMB Wills & Estates Lawyer MATTHEW McCULLOCH explains, there are important considerations to put in place well before that happens:

Unfortunately, with dementia becoming more prevalent as people live longer, the issues associated with incapacity are becoming more evident than in previous generations. While people often put off planning what should happen if they do lose capacity, failing to consider this important aspect of estate planning before it is too late can often result in problems arising, and in the worst case, extended family conflict.

In NSW, there are two important documents that deal with decisions during an individual’s lifetime if they were to become incapacitated – Powers of Attorney, which deal with financial and legal decisions and Appointments of Enduring Guardianship, which deal with health and lifestyle decisions.

By having both documents in place, a person who subsequently loses capacity will clearly have granted authority to the people that they want to make decisions in their best interests.

These documents should be considered well before there is any indication that someone’s capacity is potentially impaired or likely to be impaired in the future. Effectively, they are documents that can be executed with the hope that they never need to be used, however if something does happen, they clearly provide the appointed persons with authority to act.

If somebody has already lost capacity to the point that they are unable to understand the effect of the documents, it will be too late for that person to prepare them. This means that nobody will have legal authority to make important decisions such as managing the person’s funds, consenting to medical treatment and finding an appropriate aged care facility to meet the individual’s needs.

So what happens if you don’t have these documents in place?

If a person has already lost capacity, an application needs to be made with the Guardianship Division of the NSW Civil and Administrative Tribunal (NCAT) for Financial Management and/or Guardianship of that individual.

While in some instances the Supreme Court also has the power to hear matters with respect to financial management and guardianship, the NCAT route is generally less formal and far less expensive. 

Note that NCAT only has the power to make orders about a person residing in NSW (or in the case of financial management, owns property in NSW).

There is a form on the NCAT website that asks for details about the person who is the subject of the application, the various people involved in that person’s life, any people with differing views to the applicant and the reasons why the applicant believes the subject of the application needs somebody appointed as their financial manager or guardian.

Generally, the applicant will also need to provide medical evidence from the impaired person’s general practitioner confirming the person is unable to manage their own affairs. Once complete, the application is then submitted to NCAT and also served on any other relevant persons.

If the application is not opposed, the tribunal will normally make a determination upon review of the matter and indicate the orders that have been made with respect to financial management and/or guardianship.

If however, the application is opposed by anyone, a hearing will normally be allocated before the tribunal, with each party having the opportunity to put their submissions.

If the matter does proceed to a hearing, it is important to note that a person must seek leave in advance if they wish to have legal representation in the hearing, and even if this is approved, the role a lawyer can have during the proceedings is generally restricted.

Ultimately, NCAT will make an order with respect to the application. It may decide that nobody needs to be appointed, appoint the applicant, appoint another person, or if they are not satisfied the person’s interests will be looked after, may appoint the NSW Trustee & Guardian to manage their affairs.

A successful applicant for financial management will still need to provide annual accounts to the Trustee & Guardian and have any management plans approved.

Making an application to NCAT can be a daunting process. Even in straightforward matters, the process that needs to be followed can add stress to an already difficult time when a loved one is unable to function in the way they used to be able to.

We therefore encourage clients to consider appointing attorneys and guardians as part of their estate planning while they are fully capable, so as to avoid this process becoming necessary. It also gives them confidence that they have the most appropriate people to look after them if they become unable to do things for themselves later in life.