Making arrangements for the possibility of future mental incapacity is just as important as making a will or planning for retirement. It’s an issue that goes to the heart of how we protect vulnerable Bermudians, and will only grow in significance as our population ages.

Our laws enable you to make an enduring power of attorney, which allows you (the “grantor”) to nominate someone you trust to act on your behalf (the “attorney”) if you are unable to. This dates back to the Power of Attorneys Act 1944, which was last amended in 1968.

When you make an EPA, you are placing huge trust in your chosen representative to act for you when you are at your most vulnerable.

Financial abuse of vulnerable persons is all too common in the use of EPAs. Attention to this important topic has been properly highlighted by others over the past few months.

One of the main problems with an EPA is that, by the time financial abuse is detected, it is usually too late for the grantor to change their financial arrangements, as they may not have the mental capacity to do so. It then falls on others to seek the assistance of Ageing and Disability Services, the Bermuda Police Service, financial institutions, legal professionals and the Supreme Court to remedy the abuse.

Unfortunately, abuse of EPAs is all too common and is not unique to Bermuda. It occurs in other jurisdictions where similar legislation exists. This is why effective monitoring and other safeguards must be in place to avoid common pitfalls leading to financial abuse.

It is particularly important because abuse of older people is predicted to increase as many countries, including ours, are experiencing rapidly ageing populations. Statistics from the World Health Organisation predict that between 2015 and 2050, the proportion of the world’s older adults is estimated to almost double.

Dementia cases are also set to triple by 2050. The United Nations aptly describes financial abuse of older people as “rampant but largely invisible”, as it usually occurs in the context of assumed trust between individuals, usually from the same family.

Given this risk, people may fear that EPAs create more problems than they solve. However, the alternative is not appealing and can lead to significant stress, time and expense if you lose capacity and the Supreme Court has to decide who can make financial decisions on your behalf.

Against this backdrop, there has been an increase over the past 12 months of jurisdictions across the world seeking to review their existing laws to implement more robust power-of-attorney frameworks. This has largely been driven by the Society of Trust and Estate Practitioners, which is a global professional body, comprising lawyers, accountants, trustees and other practitioners that help families plan for their futures.

Step has developed the Global Representative Power, a best-practice template and a benchmark for EPAs — and their equivalent in other jurisdictions — that seeks to protect the vulnerable, enhance legal clarity and reduce bureaucratic hurdles across borders.

The GRP provides a timely opportunity for necessary change, which the Step Bermuda branch has the expertise to help translate into improved legislation. Here are our suggestions for change:

Creating the EPA

Tightening the rules governing the creation of an EPA so that at least one of the witnesses must be a lawyer, commissioner for oaths or notary public. This would ensure professional oversight over the important issue of whether the grantor has mental capacity to create the EPA. We should also limit the class of lay individuals who can witness the EPA so that they are independent of grantor and the attorney.

Setting limits on who can be appointed as attorney

There should be restrictions on who can be appointed, so that unsuitable people, such as those who have been declared bankrupt and paid carers, are excluded. This would mitigate the risk of loss and limit undue influence from individuals who are or are likely to be involved in the person’s care or treatment. Also, the appointment of an attorney should be cancelled in the event of divorce, if the former spouse is an attorney; and/or if the attorney subsequently becomes a paid carer or becomes bankrupt/insolvent.

Compulsory registration

There should be compulsory registration of EPAs by depositing the deed with the Registry General. This would allow concerned people, legal professionals and financial institutions to carry out a search and inspect the EPA — by paying a fee. This is a necessary first step towards providing a layer of accountability and oversight, making it more challenging for any unauthorised person to misuse the attorney’s authority. There should also be a process to notify attorneys if they have been removed. This provides an important safeguard in the event of undue influence by third parties seeking to persuade the grantor to change the identity of the attorney.

Code of conduct for attorneys

Limitations on use of EPAs should be set out in a publicly available document, including:

• The attorney should use the grantor’s property and money only to benefit the vulnerable person, not themselves

• Conflict-of-interest transactions should be prohibited, unless they are specifically set out in the EPA

• The grantor’s assets should be kept separate from the attorney’s

• The attorney should keep adequate records of each time they use their power and present these records on request

• The gifting of the donor’s assets should be limited to customary gifting, following the specific wishes of the grantor in the EPA or a recognised prior pattern of gifting. Court approval may be necessary for other types of gifting

• The attorney should be required (as far as is possible) to consult the grantor and any individual specified in the EPA before making decisions.

Definition of mental incapacity

A clear definition of mental capacity is needed. This would provide important clarity for the attorney to determine when they are allowed to use the EPA to make decisions for the grantor. We suggest following the approach taken by the Code of Practice for the Mental Health Act 1968, which adopts the definition of mental capacity in English law.

Recognition of foreign EPAs

Many of Bermuda’s residents own assets and property overseas where they may have in place a foreign EPA — or equivalent. Equally, foreign investment in Bermuda means that non-residents may also need to use a foreign EPA here. One of the main objectives of the GRP is ensuring effective operation of an EPA across borders. This portability is a game-changer in international estate planning. It eliminates the need for multiple legal documents across different jurisdictions, reducing bureaucratic hurdles and potential legal conflicts.

Reforming our Power of Attorneys Act in line with these objectives would provide clear social benefits for Bermuda's residents who already have an EPA in place. It would also encourage those who have yet to take this step to place their trust in a legal framework that effectively works to safeguard them from financial abuse. It is a worthwhile investment that would pay dividends for our ageing population.

We would also likely see increased confidence in our jurisdiction from those engaging in international trusts and estate planning, whether in Bermuda or overseas, which would in turn attract an increase in private client business.

Step Bermuda looks forward to continuing this important discussion with its members, advocacy groups and stakeholders in the coming months to achieve much needed change.

• Claire van Overdijk KC is a member of the Step Bermuda Committee and the Step GRP Expert Panel. Step Bermuda welcomes comments and views on the proposals set out in this article. Please direct these to Alex Whittaker at awhittaker@moorehtcl.bm (chair of Step Bermuda) and Claire van Overdijk KC at cvanoverdijk@applebyglobal.com