A lot of people have heard of a Power of Attorney however most do not fully appreciate the extent of its power, the benefits it delivers or the types of Powers of Attorney that exist.

A Power of Attorney is a useful legal document used to allow someone to handle your affairs in a variety of circumstances. It is often used if you are planning to go overseas, taking an extended holiday, suffer from poor health, have an accident or reach 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 explain the difference between a General Power of Attorney and an Enduring Power of Attorney.

Selecting a person to act in your place

The appointment of your Attorney enables that person (or people) to act in your place, and do the things you would normally do yourself.  Such as signing documents, paying the bills and doing the banking. The person you choose, your Attorney, has the right to stand in your shoes when you wish them to look after your affairs. In reality they can enter into agreements in your name and on your behalf.

Therefore as a result of the power of the appointment it is critical that you select the right person to act in that capacity. The person does not have to be a lawyer. In fact it is important for the person to know you well and for you to trust them. It is often a trusted family member but whoever it is must be over 18 years old.

The difference between a General and an Enduring Power of Attorney

Not all Powers of Attorney are the same.

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. 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 that 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.

An Enduring Power of Attorney, unlike the General Power of Attorney, must be explained to you by a prescribed witness, that is, a lawyer.

It is important to be aware that an Enduring Power of Attorney becomes void when you die. After that the executor of your will assumes control of your affairs.

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

The possibility that one can lose capacity during their lifetime is often not properly considered. However if you do not have an Enduring Power of Attorney in place and develop a mental incapacity you will not have anyone able to manage your financial affairs. It is simply too late at that point to have a lawyer prepare a Power of Attorney on your behalf. You will not likely be capable of understanding its effect or of properly signing it.

No person automatically has the right to manage your assets. Not even if they are your husband or wife. That is a common misconception.

Losing capacity and being unable to sign documents or manage your financial affairs will have a tremendous effect on your decision making and transactions with respect to 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 South Australian Civil and Administrative Tribunal (SACAT) or alternatively to the Supreme Court. This is typically expensive in results in delays in having appropriate arrangements made.

The applicant, usually a family member, would need to make an application to become your financial administrator. However this is subject to that person being deemed fit (as in ‘fit and proper’). Failing this finding of being ‘fit’, the Tribunal may appoint the Public Trustee to manage your affairs.

If the Public Trustee is appointed, your spouse may need to consult with a government department to deal with your ongoing financial decision making during your lifetime.

When does the Enduring Attorney’s power begin? 

You may nominate when your Attorney’s power is to begin.  If you do not nominate a date or an occasion, it begins immediately.  On the other hand, if you lose the capacity to make certain decisions before the date or occasion you nominate, the power begins at that point.

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

Summary

Today Powers of Attorney are used as a precautionary step by sensible adults rather than as a stop gap measure for an overseas trip. As the population increasingly ages and people live longer the importance of having a Power of Attorney in place is increasing. Professional groups such as accountants and financial planners, along with lawyers typically strongly recommend that their clients of all ages and backgrounds, create a Power of Attorney so that their assets are not unduly tied up in the event of a loss of legal capacity. This can ensure that your affairs can continue to be managed, bank accounts can be operated, businesses can continue to run and bills can be paid. Importantly, you can ensure that your loved ones and dependants are not put through avoidable stress.

If you or someone you know wants to know more don’t leave it too late, please contact us on (08) 8344 6422 or email admin@donlanlawyers.com.