Power of Attorney
What is a Power of Attorney? And, what is the difference between a ‘General’ and ‘Enduring’ Power of Attorney?
A Power of Attorney is a legal document that allows you (the Principal) to nominate one or more persons (referred to as an Attorney or Attorneys) to act on your behalf.
It gives the Attorney authority or the power to manage your assets, legal and financial affairs which include buying and selling real estate, shares and other assets for you, operating your bank accounts and spending money on your behalf.
At law, there are two types of Powers of Attorney that you can make – a ‘General’ and ‘Enduring’ Power of Attorney.
A ‘General’ Power of Attorney allows an Attorney to look after your assets and finances during such time that you are also able to do so yourself. For example, you could make a General Power of Attorney to cover you whilst you are travelling.
An ‘Enduring’ Power of Attorney allows an Attorney to look after your assets and your finances during such time that you are not able to do so for yourself. For example, you could make an Enduring Power of Attorney to cover you whilst you are suffering from a loss of mental capacity caused as a result of an accident, stroke or other illness.
It’s important to realise that you can only make a Power of Attorney whilst you have the mental capacity to make one.
If you have lost your mental capacity to make one and you don’t have one in place, then it means legally no one has the legal authority and power to deal with any of your assets, or legal or financial affairs on your behalf.
Let’s just stop for a minute and have a think about this. In life, sometimes thing happen which are completely unexpected and ‘out of the blue’. It could be as a result of sudden ill health or even just being in the wrong place at the wrong time.
As we don’t have a ‘crystal ball’, then we should consider putting a contingency plan in place in order to protect ourselves and our family. You can do this by making sure that you have an Enduring Power of Attorney in place, as a just in case.
One of the many questions we are asked is, “Who should I appoint as my Attorney?”
The short answer is someone whom you trust, who is familiar with your financial affairs, who is willing and able and whom you think has the appropriate skillsets to be able to manage your assets and financial affairs and make financial decisions on your behalf.
At law, the person you appoint must be over 18 years of age and must not be bankrupt or insolvent. For example, this could be your spouse, adult children, a friend or a professional person such as a financial planner, accountant or even a lawyer whom you have discussed this with and ultimately who has the skills to be able to deal with complex financial arrangements.
The choice of who you appoint and how many you appoint is up to you. You could decide to just have one Attorney and then appoint a Substitute Attorney who would only have authority to act if your first appointed Attorney was unable to. You can even appoint more than one Attorney and direct that they are to act ‘jointly’ or ‘jointly and severally’.
If you appoint your Attorneys to act jointly, then they must all act, agree and make decisions together. Whereas, if you appoint them jointly and severally, it means that your Attorneys can act, agree and make decisions together or any one of your Attorneys can act and make decisions on their own without the others. This is what ‘severally’ means.
When you make your Power of Attorney, you can place limits and conditions on what your Attorney can do on your behalf. For example, you can give your Attorney the ability to make gifts on your behalf and also use and apply your assets and financial affairs for someone else’s benefit.
For example, a husband may appoint his wife and give her the power to use assets that are held in his name for her and any of their children. Practically, what this would mean is that if something happened to the husband, then his wife could ‘step in his shoes’ and continue to meet payment of the costs of the reasonable living and medical expenses of herself and any of her children, out of her husband’s assets.
You are probably thinking to yourself, “Yes, this is what I want to have happen if something like that happens to me”. And it’s what most people want to have happen, it’s just unfortunate that many people don’t get around to making a Power of Attorney until it’s too late.
In addition to placing limits and conditions on your Attorney’s power, you can also state whether or not you would like the Power of Attorney to come into effect immediately when it is signed, once your Attorney considers that you need assistance managing your affairs or even once an independent registered medical practitioner considers that you lack capacity due to unsoundness of mind.
As with all legal documents, if your situation changes, whether that be a change in the nature of the relationship between you and any one of your Attorneys or if the situation of the Attorney changes, such as if they were to pass away, move permanently overseas or even resign, then it’s at that stage that you should consider updating and maybe even changing your Power of Attorney.
One of the things we don’t like hearing at Aitken Lawyers are situations where a person has lost the mental capacity to be able to manage their own assets and financial affairs and they are unlikely to regain that capacity at any time in the future, if at all.
If these people had made an Enduring Power of Attorney, then their assets and financial affairs could be managed, bills could continue to be paid and everything just kept ‘ticking over’.
Simple things like paying an electricity bill, making an enquiry at Telstra, let alone big things such as arranging the sale of a house or the sale of shares in someone’s name without an Enduring Power of Attorney, nothing can happen.
For people in these situations, what it means is that someone would need to make an application to the NSW Civil and Administrative Tribunal, Guardianship Division to be appointed to manage that persons’ assets and financial affairs. The reality is it can be days, if not weeks or sometime months until a hearing of the application occurs and then someone is legally appointed to be able to manage the assets and financial affairs.
What you may not know, is that someone who is appointed may not be a family member or a friend. It could be someone completely independent, unknown to you and unfamiliar with your assets and financial affairs. It may, in some circumstances, be the NSW Trustee and Guardian.
At this point, you have to ask yourself, “Is this what I want?”
We know you don’t and that is why we ask you to let us help you to make an Enduring Power of Attorney in order to avoid this possibly happening to you and your family in the event that something unfortunate happens to you.
It’s so easy to do and easier still to just put it off until later because let’s face it, it’s not a pleasant thing to think or talk about, let alone do something about.
Just stop and think again about what would happen to you and your family if you suddenly lost your mental capacity and didn’t have an Enduring Power of Attorney in place.
Don’t delay any further and let us help you to make a Power of Attorney as a “just in case” by contacting one of your estate planning lawyers on (02) 8987 0000.