- Dementia patient’s S$48,000 fixed deposit gone

Dementia patient’s S$48,000 fixed deposit gone

Written by Wilfred Ling

Tuesday, 07 September 2010

I just saw the news about a dementia patient whose fixed deposit worth $48,000 was “gone.” Well, it was not really gone but the account was supposedly to be held in a POSB joint account with her daughter but the bank permitted the dementia patient to close the account and open as a new joint account with another family member. It appears that the dementia lady suffers from cognitive impairment and did not have the mental capacity to make such decisions. What is disturbing is that the bank allowed the transaction to take place and deny all responsibility citing “bank staff cannot pass credible judgement on the psychological or mental well-being of any customer”.

Once again, the importance of financial planning cannot be ignored because through proper financial planning, such problems would not have happened. I have incorporated the usage of Lasting of Power Attorney (LPA) into all my financial plans for clients since July this year. The usage of LPA will allow proxy (or Donees) to have the power to act on behalf of the person (the Donor) who has lost their mental capacity. However, having an LPA is not enough because of two weak links.

First weak link is that the donees can die or lose mental capacity themselves. Second weak link is that if the financial institution does not do its own due diligent to determine the mental capacity of the individual, the Donor’s money can still be lost without the Donee even knowing it. Thus, assets can still be lost regardless of whether is there an LPA or not.

The solution is to setup a standby living trust with minimum assets initially. Upon mental incapacity, the donee can transfer the donor’s assets to the trust so that the trustee can manage the assets for the benefit of the Donor. In this way, two of the weakest link are removed. Alternatively, the individual can transfer a significant sum of his assets as Settlor to the living trust when he still have the mental capacity to do so. If the trust is structured as a revocable trust, he can always change his mind later on. Of course, once he loses his mental capacity, revocating the trust is no longer possible. For more information, read this: Specific Needs Planning & Advanced Estate Planning

This blog article was also posted on CPF's IMSavvy IM$avvy: http://www.cpf.gov.sg/imsavvy/blog_post.asp?postid={1073487591-137-7685052751}

Comments

Add New

RSS

Anonymous

|119.75.56.186 |2010-09-07 19:59:00

Quote:

In May, the High Court ruled in favour of OCBC Bank to freeze a S$8.9 million account on the grounds that the account holder was not mentally competent when she wanted to close her account.

As in many things in modern life, trigger points and values are measured in dollars. I guess $50K, $100K, maybe even $200K won't even raise an eyelid. But when you're closing a $9M account, you can bet the bank manager & assistant manager & bank teller will triple-check and quadruple-check the transaction and account holder(s).