The extrajudicial power of attorney: the unknown key to peace of mind for young and old
The daily enjoyment of exercising decision-making power, not only in business but also relating to one’s private life, might seem second nature to every corporate leader.
Yet this illusion will easily be dispelled when certain unforeseeable and unwanted events in life occur: such as, becoming comatose after an accident, contracting a serious illness or becoming a victim of dementia. In those circumstances, your sense of full autonomy must give in to a temporary or even irreversible state of legal incapacity in which the once so obvious power of decision-making no longer exists.
Nevertheless, the financial, business and administrative whirlpool will still continue: incoming invoices must be paid, investment portfolios must be managed, property must be let or sold, among other obligations.
Fortunately, an extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) makes it possible to effectively anticipate the consequences of this legal incapacity.
The possibilities offered by the abovementioned extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) were recently extended by the Act of 21 December 2018, which entered into force on 1 March 2019.
This Act not only broadens the application field of this specific form of a power of attorney with key importance in case of an individual directly being affected by legal incapacity, but also has important consequences for every general power of attorney. For example, a decision-making mandate that is granted by the members of a Belgian Partnership to its manager.
Given the importance of the concept of a Belgian Partnership for reasons of wealth management and estate planning, the relevance of the aforementioned amendment of the law to existing and future Partnerships will also be briefly discussed below.
- Power of attorney in case of legal incapacity
a) Legal fallback procedure in case no extrajudicial power of attorney (“zorgvolmacht” / ”procuration de soins”) was established
In the absence of a prior arrangement that provides a safety net in case of legal incapacity, the Justice of the Peace will appoint a special administrator with the task of further managing the incapacitated person’s assets under constant supervision of the Justice of the Peace Court. The responsibility for appointing the special administrator is exclusively in the hands of the Justice of the Peace. The special administrator could be a family member, but it could also be (and is often) someone totally unrelated to the disabled person.
b) Anno 2019, keeping control by means of an extrajudicial power of attorney (“zorgvolmacht” / ”procuration de soins”)
Adults who don’t want to make their asset management dependent on a discretionary decision and permanent supervision of the Justice of the Peace, have the option of drawing up an extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”).
Such a power of attorney offers the possibility of (i) appointing one or more known persons as special administrator with the instruction of further managing one’s assets in a manner determined in the power of attorney and (ii) determining exactly which specific actions can be taken by that special administrator.
- Content of an extrajudicial power of attorney (“zorgvolmacht” / ”procuration de soins”) drawn up for the possibility of future legal incapacity
a) Consequences for a person’s asset management and wealth planning
Every legally competent adult can, at its sole discretion, customize the content of his or her power of attorney, ranging from a mandate to take rather simple actions, such as paying invoices, account management or renting immovable property to an authorization modifying his/her marriage certificate or drawing up a donation agreement. This can all be done in accordance with the conditions and modalities predetermined in the power of attorney. In that way, (a part of) one’s assets can still be transferred to the next generation in a tax-friendly manner. This directly demonstrates the importance of an extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) for estate planning purposes.
Important to note is also that an entrepreneur can even include the necessary arrangements for the further management and administration of his company and/or shares in his power of attorney.
b) Extension of the scope to personal matters
Initially, an extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) could only be granted for the further arrangement of a person’s asset management.
With the Act of 21 December 2018, which recently came into force on 1 March 2019, the scope of the extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) has significantly been extended in order to include the organization of future personal matters. For example, since 1 March it is possible to determine who will decide on future medical matters or on a person’s possible admission to a nursing home.
- Impact on the amendment of the Law on existing and future Partnerships
The Act of 21 December 2018 not only broadens the scope of the extrajudicial power of attorney (“zorgvolmacht” / ”procuration de soins”) with key emphasis on cases of future legal incapacity but it also has a relevant impact on every other power of attorney.
The abovementioned Act has made an adjustment to the existing article 2003 of the Belgian Civil Code as a consequence of which every regular power of attorney – this contrary to the abovementioned extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) that enters into force in case of legal incapacity – will automatically end when the principal becomes incapacitated.
The foregoing applies, for example, to a bank power of attorney, but also to any mandate of a manager within the framework of Belgian Partnership. In case the articles of association do not provide for a different arrangement, the managerial position will terminate by operation of law when one of the members of the Partnership becomes incapacitated.
This risk can easily be prevented by amending the articles of association.
- Conclusion
The legislation gives the opportunity, when still possible, to anticipate a potential temporary or permanent incapacity, without the need for intervention by a Justice of the Peace.
By virtue of a customized extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”), it is possible to further develop personal wealth and succession planning, even if one is affected by legal incapacity.
A diligent editing of a tailor-made extrajudicial power of attorney (“zorgvolmacht”/”procuration de soins”) is the best instrument to ensure a legally correct declaration of one’s wishes, needs and emotions and guarantees an effective implementation.
Finally, in view of the impact of the abovementioned legislative amendment, we would like to highlight the importance of a review and possible adjustment of the articles of association of existing Belgian Partnership(s).