Trust or Power of Attorney for Incapacity Planning

If illness, an accident or age ever leaves you unable to take decisions, someone else will have to deal with your bank accounts, your property and your investments. The two tools most often discussed are a power of attorney (a mandate given to an agent) and a trust. The trust vs power of attorney incapacity question is really a question about timing, control and continuity: who can act, from when, under whose supervision and for how long.

This page compares the two for mental incapacity planning in Mauritius. It is general information, not advice. The right answer depends on your assets, your family, where you live and the exact wording of the documents, so a qualified adviser should review your situation.

The short answer

A power of attorney is a personal authority. You appoint an agent to act in your name. It is quick to put in place and leaves ownership of your assets with you. Its weakness is that an agency of this kind rests on your continued capacity: under the general law of mandate, an ordinary mandate can come to an end when the person who granted it loses the ability to manage their affairs. Whether any given document survives incapacity must be checked against the text and current law, not assumed.

A trust works differently. You transfer assets to a trustee, who holds them under the terms of a deed. Because the trustee is the legal owner, your own capacity does not decide whether the structure keeps working. The price is that assets must actually be transferred, the arrangement is more formal, and the trustee owes duties that are enforced by law.

How a power of attorney works

What it does

You (the principal) name an agent and describe the acts they may carry out: operating accounts, paying bills, signing documents, dealing with property. The agent acts in your name, and the assets stay yours throughout.

Where it can fall short

• Continuity. If the document does not survive your incapacity, it may stop being usable at exactly the moment you need it. Banks and notaries may also ask for fresh confirmation that the authority is still valid.
• Scope. A narrow document may not cover every asset, and a very broad one gives an individual wide freedom with little supervision.
• Cross-border assets. An authority drafted for use in Mauritius may not be accepted abroad, and the reverse is also true.
• Death. A power of attorney does not manage your estate after you die. Succession rules then take over; see what happens when the settlor dies and the comparison between a trust and a will.

How a trust works for incapacity

What it does

Under the Trusts Act 2001, a settlor transfers assets to a trustee, who holds and manages them for the beneficiaries according to the deed. If the settlor is also a beneficiary, the trustee can continue to apply the assets for the settlor's benefit when the settlor can no longer manage them. For a full introduction, see what a trust is.

The trustee

A trustee acting professionally in or from Mauritius is a "qualified trustee": under section 2 of the Trusts Act 2001, this means an FSC-licensed corporate service provider (Management Licence), or another person resident in Mauritius authorised by the Financial Services Commission (FSC) to provide trustee services. The Financial Services Act 2007 requires a management licence from the FSC to act as a corporate trustee or qualified trustee. That regulatory layer is part of what you pay for with a trust: the trustee is supervised, keeps records and must follow anti-money-laundering rules. The detail of these duties is covered in duties of a trustee toward the family.

Oversight during incapacity

A well-drafted deed can add a safeguard for exactly this situation. Section 24 of the Trusts Act 2001 allows the deed to provide for a protector, who may be an adult (including the settlor) or a body corporate. Unless the deed says otherwise, the protector can remove and appoint trustees, change the governing law and the place of administration, and withhold consent to certain acts, without becoming a trustee. Read what a trust protector does before deciding who should hold that role, and note that a settlor who is incapacitated cannot exercise it, so a successor should be named.

Where a trust can fall short

• Funding. A trust manages only what has been transferred into it. Assets left in your own name remain outside it, and they are the ones that need an agent.
• Formality. A deed has to be drafted carefully and the transfers completed properly, with tax and legal consequences to review beforehand.
• Loss of control. A settlor who keeps too many powers can invite the argument that the arrangement is not a genuine trust. See how much control a settlor can keep and sham trusts.

Side-by-side comparison

Practical differences that matter

Which should you choose?

There is no universal answer, and many families end up using both. The decision tree below is a starting point for a conversation with an adviser, not a recommendation.

Using both together

A common pattern is to place the core family assets in a trust and to give a trusted person a narrow power of attorney for anything left in your own name: a current account, a vehicle, correspondence with tax authorities. The trust handles continuity and long-term wishes; the attorney handles loose ends. Assets that were meant to go into the trust but were never transferred are one of the most frequent gaps, and the annual trust review checklist is a useful way to catch them.

Guiding the people who act for you

Neither tool tells the person acting how you would want things done. A letter of wishes can set out your preferences for your care, your family's support and the handling of particular assets. It is not binding in the same way as the deed, but trustees commonly take it into account.

Keeping the option to change course

If you worry about giving up control while you still have capacity, compare revocable and irrevocable trusts. The more flexibility you retain, the more closely the structure must be examined, both for tax and for the risk of being treated as a sham.

Questions to settle before you decide

• Which assets would need managing if you lost capacity tomorrow?
• Are any of them held abroad, and would the foreign authority be recognised there?
• Who would you trust as agent or trustee, and who would be their successor?
• Who should supervise them (a protector, family members, a professional)?
• Does each document say expressly what happens on incapacity and on death?
• Have you recorded your wishes in writing for those who will act?

If you would like your situation looked at by a licensed provider, you can send a request through the site.