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Enduring Power of Attorney

enduring power of attorney

Enduring Power of Attorney

When people think of estate planning they usually think of the need for superannuation, life insurance and income protection but equally important is the need for a Will and an Enduring Power of Attorney. I have spoken at length over the last month about the need for a Will now I wish to turn to the equally important aspect of having an Enduring Power of Attorney.

What is an Enduring Power of Attorney?

It is a document given by one person (the Donor) to another person (the Attorney) which enables the Attorney to act on behalf of the Donor and to do all things which the Donor could himself do. The Attorney in effect steps into the shoes of the Donor and can sign documents, access bank accounts etc.

Why do I need one?

Everybody should have an Enduring Power of Attorney appointing either their spouse, relative or close friend to act on their behalf in the event that they are either absent or mentally incapable of handling their affairs e.g. if you are out of town and need documents signed or access to monies or something to be done on your behalf which only an authorised person can do for you.

But the real benefit of an Enduring Power of Attorney is that the power to act on your behalf continues after you become mentally or physically incapable of doing things on your own behalf. For example, we have had cases where the husband and wife may, for tax purposes, have an investment property, shares or money invested in one persons name only. That person has suffered a stroke, heart attack or been in a motor car accident such that they are either physically or mentally incapable of handling their own affairs. The spouse may need to sell some of the assets or access some of the money in order to provide ongoing medical care for the injured party but because they don’t have an Enduring Power of Attorney that cannot easily be done. Instead, a Government appointed Trustee is nominated and as you can imagine, the process becomes very expensive and bogged down with red tape. That could all have been avoided by the making of an Enduring Power of Attorney.

Who should have one?

The simple answer is: Everybody! Spouses should each have one appointing the other their Attorney, the same applies for people in defacto relationships. But also think of the need for the elderly to appoint a child or children Attorney for them and also single children appointing a parent or parents as their Attorney.

It is especially important for adult children to think about their parents as they get older. By having an Enduring Power of Attorney a son or daughter can help their parents as they get on in life with accessing bank accounts, handling documents etc and in the event of mum or dad suffering a stroke or heart attack being able to handle their affairs.

For example, we had a case where an elderly woman suffered a stroke and was physically and mentally incapable of handling her affairs. The family home was in her name only and the children had to place her in a nursing home. The problem was that the home had to be maintained, the rates and insurance paid as well as meeting the costs of nursing care. There was no Enduring Power of Attorney. If there had been, the children could have sold the family home, placed the proceeds on trust for mum and met her ongoing care from the sale proceeds.

So think about it, if you have parents (it doesn’t matter how old they are now) seriously consider the benefit to them and you of having an Enduring Power of Attorney so that one day you will not face the same problems as the family mentioned above.

 

Video 

Prefer the video format? Our principal, John McLaughlin, provides an informative Law Talk episode about the Enduring Powers of Attorney

Why Have a Power of Attorney?

enduring power of attorney

 

What is Probate and how does this relate to a Power of Attorney?

What is Probate? This isn’t always required but essentially, it’s when the Supreme Court recognises that a Will is valid. As you will see below however, Power of Attorney is totally different and in fact, ends upon death.

We have found that many people believe that a spouse (whether married or de facto) is able make decisions on behalf of their partner, as a matter of right, due to their relationship.

This is simply not the case.

The decision making process is solely within the purview of each individual person and is generally only able to be transferred to another when a person enters into a Power of Attorney document.

When a person (known as the Principal) enters into a Power Attorney document they are, in effect, transferring their power to another person (known as the Attorney).

It is the transfer of this personal power which permits an Attorney to make decisions for and/or act in the place of the Principal. The types of decisions that an Attorney can make are broad ranging, from financial matters, such as selling a house, taking care of the finances to personal/heath matters such as deciding about where a person will live. A Principal can also limit an Attorney’s power, should they wish to do so, or expand upon it to allow the Attorney to enter into conflict transactions. This is particularly relevant where an Husband/Wife has been appointed as an Attorney.

Where an Attorney has also been appointed to make decisions regarding Personal/Heath matters, this power only commences when the Principal has lost his or her mental capacity.

Having a valid power of attorney is beneficial for a number of reasons, such as:-

  • older people are able to appoint the person they want to take care of things
    for them should s/he not be able to do so in the future;
  • going overseas for an extended time, and want a person in Australia to take
    care of things;
  • where a person suffers poor heath and wants to ensure that their affairs
    are in order should they lose capacity.

Powers of Attorney documents are also beneficial should you have an accident and lose your mental capacity.  In this instance, should you not have a Power of Attorney, a relative would need to apply to the Tribunal to be appointed as your Guardian and Administrator.  This can be a lengthy process and it may be that necessary a government body would have to look after you/your affairs until any other appointment has been made.

There are two types of Power of Attorney Documents, being:-

  • A General Power of Attorney – this type of document is generally only used when a Principal wants their Attorney to operate on their behalf for specific transaction.  These types of transactions are generally involve commercial transactions and do not permit the attorney to make decision for the health care of the principal.
  • An Enduring Power of Attorney – this type of document is generally used when a Principal wants to ensure that the Attorney can act on their behalf for a full range of financial matters, and also assist the Principal should he or she need assistance in Personal/Health Matters upon the loss of mental capacity. However the primary difference between these two types of documents is that the power provided under a General Power of Attorney will end on when the Principal losing his or her mental capacity whereas the Enduring Power of Attorney will continue to remain in full force and effect.

When appointing an Attorney, the Principal should appointment a person whom they trust will act in their best interests.  There are also other requirements, such as your attorney not being your paid carer or health care provider.

Problems can occur if the Power of Attorney document has not been completed correctly or it not been witnessed correctly.

A witness’s duty extends further than merely witnessing the Principal’s signature. The witness must also judge whether or not the Principal understands the nature and effect of the Power they are providing.

If not, then the power of attorney can be challenged by any interest party.

Therefore, it is important that if you are considering providing this Power to another person, that you be properly informed, by a legal practitioner, as to the nature and effect of the Powers you are providing to another person(s) under the Power of Attorney document.

If you are still asking yourself – What is Probate? – check out our document of Technical Details.

Video

Prefer to watch a video? Our principal, John McLaughlin, provides an informative Law Talk episode about the Enduring Powers of Attorney