Caring for a mentally incapacitated person or an aged loved one is a profound responsibility that requires compassion, patience and a deep understanding of their unique needs. Such care imposes a heavy burden, especially on friends and family members. In any event, close friends or family will need to take the necessary steps to protect their best interests and manage assets.
As matters currently stand, Cyprus does not have the legal framework to enable such planning efficiently and productively. To appoint a representative for a mentally incapacitated person, a member of the close family must apply to the courts, with supporting evidential documentation, and wait for a hearing date. As in most jurisdictions, such legal procedures take time and are costly. They may also be inconvenient, especially if we consider the formalities that must be adhered to when an individual who resides abroad has assets in Cyprus.
This creates a significant time gap, leaving the mentally incapacitated person without proper medical care or financial support for their daily needs for a considerable time. Additionally, the appointed representative may not have been the mentally incapacitated person’s preferred or trusted choice if they had the ability to make the decision themselves.
As advisors on estate planning and succession, and in the absence of any sturdy legal framework, the solution proposed is to incorporate Lasting Power of Attorney (LPA) into local law. An LPA is a legal document that allows an individual to appoint one or more people to make decisions on his or her behalf, should they lose capacity in the future, either for example if one falls ill or suffers a serious injury that is irreparable.
To this end, the STEP Cyprus Branch is currently working on a draft bill of a law which it endeavours to present to the House of Representatives for discussion, and, if successful, pass it into law.
The Branch intends to hold meetings with political parties, irrespective of ideology, and present the case for the dire need of introducing the concept of a lasting power of attorney into local legislation and the benefits such LPAs produce.
The global professional membership body STEP has developed the Global Representative Power (STEP GRP), a template for an enduring power of attorney which takes effect upon the donor’s mental incapacity. The STEP GRP is globally recognised and portable across borders. It aims to serve as a ’best practice’ model when and if new legislation is introduced in line with the spirit of the Hague Convention on the International Protection of Adults.
Legal guardianship is a crucial tool that allows one person to decide for an adult who is incapacitated as they may not have the capacity to make their own decisions. This includes health care decisions or decisions about their financial affairs (known as conservatorship). Courts have to establish guardianships via court order. Courts typically appoint guardians if it is the less restrictive alternative.
Instead of having to go through a court process, the LPA offers an effective, less time-consuming and less costly option. It also allows an individual to choose their guardian and define the powers granted to the chosen guardian before becoming mentally incapacitated. It’s worth considering the benefits of putting an LPA in place for if one ever becomes unable to make his or her own decisions and manage their affairs.
How does an LPA work?
There are two types of LPA: one for management of finances and property, and another for health and welfare decisions. It’s useful to note that one can choose to appoint different people to act under the powers.
People running their own businesses or in a partnership may need to create separate LPAs for their business and personal finances. Individuals wishing to use an LPA to be proactive in case of an injury or incapacity often appoint close family members as an attorney. In these circumstances incorporating appropriate and measured safeguarding clauses ensures they will act in the appointer’s best interests. A well-drafted LPA can prevent family members from abusing their position of trust under the powers conferred to them under the terms of the LPA.
Choosing an attorney
LPAs are powerful documents, and the appointed attorney can do just about everything that the appointer could do when dealing with assets of whatever nature and form. Therefore, it’s worth spending time considering the values, beliefs and skills of whoever you choose to ensure that they do a good job.
The authority granted to the attorney/s will continue until death when it’s automatically terminated by operation of law, or until it is revoked. This can only be done by deed, and is subject to the appointer having mental capacity to do so.
Remember, an LPA is a deed and so cannot be amended after it has been validated by the registration process. To change an LPA, one would have to revoke the power and start again. This will add to the costs and so it’s important to get it right first time.
Benefits of LPAs for Cyprus residents
Introducing this pioneering option of an LPA into local law in line with the above objectives would provide clear social benefits for Cyprus’ residents. Having an LPA in place means people can trust in a legal framework that effectively works to safeguard them from financial abuse. It is a useful tool for our aging population but also for people with other forms of mental incapacity.
Most likely, incorporating the LPA into local law would potentially also see increased confidence in Cyprus as a jurisdiction from those that do not engage in other available structures, such as international trusts and estate planning whether in Cyprus or abroad. By extension, this would increase private client business.
All these considerations are being considered by the STEP Cyprus Branch in a current proposed bill of law being drafted. Our aim is to present this draft to the House of Representatives before the summer of 2025.
Nicky Xenofontos TEP, Chair of STEP Cyprus and Stella Kammitsi TEP, SΤEP Cyprus Board Member and Deputy Chair STEP Europe Region
