DLS Updates – Enduring Powers of Attorney Explained

Enduring Powers of Attorney Explained

Many people have heard of a Power of Attorney, however, most do not fully appreciate the extent of the document’s power, the benefits it offers, the potential for abuse or the types of Powers of Attorney that exist.

A Power of Attorney can be a useful legal document as it authorises someone (the Attorney) to look after your legal and financial affairs. It is often used if you are planning to go overseas, taking an extended holiday, suffering from poor health, have had an accident or reached a stage in your life when you need greater assistance managing your affairs.

In this article, we examine why appointing a Power of Attorney is so strongly recommended by lawyers and we explain the difference between a General Power of Attorney and an Enduring Power of Attorney.

Selecting the right person to act in your place

The appointment of your Attorney enables that person (or persons) to act in your place, and do the things that you would normally do yourself, such as signing documents, paying bills and banking. Your Attorney, has the right to stand in your shoes when you appoint them to look after your affairs.

The powers under the document extend to entering into agreements in your name and on your behalf including the sale or purchase of real estate, or in some circumstances, executing a binding death benefit nomination on your behalf.

Due to the extent of the powers conferred by the document, it is critical that you select the right person/s to act in that capacity. The person/s you appoint as your Attorney should know you well, be trustworthy and ALWAYS have your best interests in mind. Often, people appoint a trusted family member/s as their attorney.

A power of attorney is an extremely powerful document. Once you have appointed a person to act as your Attorney and the power of attorney has come in to effect, the Attorney can act without your knowledge or consent.

The difference between a General Power of Attorney and an Enduring Power of Attorney

A General Power of Attorney is a legal document that gives the Attorney the authority to make decisions about financial and legal matters on behalf of the person who appoints them (the donor). This power lasts only for as long as the person who appoints them has mental capacity. The general power ceases to operate if the person who has made the Power of Attorney loses capacity to make decisions. A General Power of Attorney is often used as a tool of convenience. For example, a person might appoint a General Power of Attorney to look after their financial and legal affairs in Australia while they travel overseas.

An Enduring Power of Attorney is similar to a General Power of Attorney except that the powers continue, or endure, in the event the donor loses mental capacity.

In New South Wales, a document appointing an Enduring Guardian can be used alongside an Enduring Power of Attorney to authorise medical and health decisions.

An Enduring Power of Attorney, unlike the General Power of Attorney, must be explained to you by a prescribed witness, including a lawyer, to certify that you understand the document and that the effect of the document will continue even after you have lost mental capacity.

It is important to be aware that both Power of Attorney documents, as well the Enduring Guardian briefly mentioned above, become void when you die.

What happens if you lose capacity without having a Power of Attorney?

The probability that someone can lose capacity is often not properly considered. However, if you do not have an Enduring Power of Attorney and develop a mental incapacity, you may be unable to manage your financial affairs. It will be too late then to have a lawyer prepare such a document if you do not have capacity to understand it.

The difficulty is that no person automatically has the right to manage your assets, not even if they are your husband or wife.

If no one is able to manage your financial and legal affairs this may significantly impact all financial decision making thereafter with your bank accounts, your jointly owned home, shares or other jointly owned assets or liabilities.

To have decisions made in these circumstances would then involve an application to the NSW Civil and Administrative Tribunal (formerly the Guardianship Tribunal).

The applicant, usually a family member, would apply to become your financial manager. However this is subject to that person being deemed fit (as in ‘fit and proper’) by the Tribunal. Failing this finding of being ‘fit’, the Tribunal may appoint the NSW Trustee and Guardian to manage your affairs.

If the NSW Trustee and Guardian is appointed, your spouse may need to consult with a government department to deal with your ongoing financial decision making until your death.

When does the Attorney’s power begin?

You may nominate when your Attorney’s power is to begin. If you do not name a date or an occasion, it begins immediately.

It is important to note that even if you give your Attorney power immediately, you may also continue to make decisions yourself while you have capacity to do so. By providing a Power of Attorney, you do not restrict or give up the right to make financial decisions as you do today.

Summary

Today, Powers of Attorney form an important part of the estate planning process.

When clients are making a Will to plan for what will happen when they pass away , it is just as important, if not more so, to put plans in place for whilst the client is still alive, but may lack the capacity to make his/her own decisions.

Professional groups such as accountants, financial planners, and lawyers, strongly recommend that their clients of all ages and walks of life make a Power of Attorney so that their assets are not locked up if a person loses legal capacity. By doing so, their loved ones are not put through avoidable stress.

Don’t leave it too late! Please contact us on 02 9212 1099 or email info@dls-lawyers.com should you require assistance.