Enduring Powers of Attorney in Hong Kong: Planning for Incapacity

Introduction

An enduring power of attorney (EPA) is a legal document by which a person (the donor) grants another person (the donee or attorney) the authority to manage their financial and legal affairs, with the key feature that the power continues (or "endures") even if the donor subsequently loses mental capacity. This distinguishes EPAs from ordinary powers of attorney, which automatically lapse upon the donor's incapacity.

In Hong Kong, EPAs are governed by the Enduring Powers of Attorney Ordinance (Cap. 501). They are an essential tool for personal incapacity planning, complementing a will (which only takes effect on death) and a Lasting Power of Attorney (LPA, which addresses personal welfare decisions).

Why an EPA Is Important

Without an EPA, if a person becomes mentally incapacitated, their assets become "frozen" and cannot be managed by family members or carers without a court order. The alternative — applying to the court for a committee of the estate under the Mental Health Ordinance (Cap. 136) — is expensive, time-consuming, and subjects the incapacitated person's affairs to ongoing court supervision.

An EPA avoids this by allowing the donor, while they have capacity, to designate a trusted person to manage their affairs seamlessly in the event of incapacity.

Formal Requirements for a Valid EPA

Under Cap. 501, an EPA must be executed in the prescribed form and comply with the following requirements:

• The donor must have mental capacity at the time of execution
• The donor must be at least 18 years old
• The EPA must be in writing and in the prescribed form (Form 1 under the Ordinance)
• The donor's signature must be witnessed by a solicitor, who must certify that the donor understood the nature and effect of the document
• The donee must separately sign a certificate acknowledging acceptance of the duties
• The donee must be at least 18 years old and not be a bankrupt

When Does an EPA Take Effect?

An EPA can be drafted to take effect immediately upon execution (meaning the donee can act even while the donor has capacity), or it can be expressed to take effect only upon the donor's incapacity. The latter is more common in estate planning contexts, as it reserves the donor's control over their own affairs until they no longer have capacity.

Scope of the EPA

The EPA may be general (covering all of the donor's property and financial affairs) or limited (covering specified matters, such as managing a particular bank account or property). The scope should be carefully considered: too broad and the donor loses control of affairs they can still manage; too narrow and the attorney may be unable to deal with unexpected situations.

The Donee's Duties

The donee of an EPA is in a fiduciary position and owes duties to the donor, including:

• Acting in the donor's best interests
• Keeping the donor's assets separate from the donee's own assets
• Keeping proper accounts
• Not making gifts from the donor's assets except to the extent permitted by the EPA or authorised by the court

Registration of the EPA

Cap. 501 requires the donee to register the EPA with the High Court before acting on it once the donor has become or is becoming mentally incapable. Registration provides a degree of protection to third parties who deal with the donee, and triggers the court's supervisory jurisdiction over the EPA.

How Alan Wong LLP Can Assist

Alan Wong LLP's private wealth and trusts team assists individuals in preparing EPAs as part of a comprehensive incapacity planning framework. We advise on the appropriate scope of the EPA, the choice of donee, and the interaction between the EPA, any Lasting Power of Attorney (for welfare decisions), and the donor's will and trust arrangements. We also assist families where a family member has lost capacity without having made an EPA, including applications to the court for committee appointments under the Mental Health Ordinance.