Most of us may have an up-to-date Will, but how many of us have thought about who will manage our affairs if we become incapacitated?
A power of attorney is a legal document that allows you (as the ‘principal‘) to appoint a person (the attorney) to make decisions about your property or financial affairs.
It depends on the jurisdiction but generally a ‘general power of attorney’ ceases to have effect after you lose the mental capacity to make financial decisions. An ‘enduring power of attorney’ will continue to have effect even if for any reason you lose your mental capacity to manage your own affairs.
By making an enduring power of attorney, you are choosing who you want to manage your financial affairs, even if you lose mental capacity.
If you lose mental capacity, without an enduring power of attorney in place, there may be no one with the legal authority to manage your financial affairs. Your family or advisers would then need to apply to the relevant authority in your State or Territory to have someone appointed.
An adult can make an enduring power of attorney if they are capable of understanding the nature and effect of the power of attorney and the range of decisions which their attorney is authorised to make.
A person who has a cognitive disability may still have capacity to make an enduring power of attorney. It would depend on their level of understanding about the power of attorney.
If there is any doubt about whether a person has the capacity to make an enduring power of attorney, an appropriately qualified medical practitioner should assess the person’s understanding beforehand.
An attorney can have an enormous power over your affairs. You should choose an attorney whom you trust and who will manage your finances in a responsible manner. If your financial affairs are complex, you should appoint an attorney who is capable of managing complex affairs and is available and willing to do so.
You may wish to appoint a family member or a close friend as your attorney. You can also appoint a trustee company, such as us.
You can appoint more than one attorney. When appointing more than one attorney, you should choose people who can cooperate with each other and work together in your best interests. You can appoint your attorneys to act:
If your attorneys are able to act separately, the enduring power of attorney will continue even when one of the attorneys can no longer act. However, if you appoint your attorneys to act jointly, the death or incapacity of one of the attorneys may automatically end the enduring power of attorney (depending on the jurisdiction and the document itself).
If your first choice is unable or unwilling to act, you should also consider appointing a substitute attorney. For example, if you appoint your partner as your attorney and you are subsequently both involved in an accident, your partner may be unable to act for you due to their own incapacity. If you have not appointed a substitute, then you will have no authorised attorney.
There are different requirements in each jurisdiction, but generally you can choose when you would like your enduring power of attorney to commence. You may want it to start immediately after you appoint the attorney or at some future date. You may wish it to start only when your attorney thinks you need help with managing your financial affairs. Alternatively, you may wish it to start only when a doctor provides evidence that you are unable to manage your affairs.
You indicate on the power of attorney when it is to commence. If you do not indicate a commencement time, it will come into effect when the attorney accepts the appointment.
You can give your attorney the power to make any decision about your finances or property which you could make yourself. These broad and general powers include paying bills, selling a property, making investments, accessing cash and buying or selling shares.
You can control the powers you give to the attorney by placing limits or conditions in the enduring power of attorney. For example, you can give the attorney authority to pay bills but not to sell property. If you wish to include limits or conditions in your enduring power of attorney you should seek expert advice about the best way to do this.
If you are a member, and therefore trustee (or director of a corporate trustee), of a self-managed superannuation fund, your attorney can be appointed as a trustee of the fund in your place in the event of your incapacity (depending on the governing rules of the fund). As a result, your fund can remain a complying superannuation fund and retain the significant taxation benefits available to a complying fund.
In most jurisdictions, an enduring power of attorney cannot be used to make medical or lifestyle decisions. If you want to appoint someone to make medical or lifestyle decisions on your behalf, each State and Territory has a procedure for making such an appointment.
An attorney is in an important position of trust. The attorney has a responsibility to always act only in your best interests.
The attorney must:
If your attorney abuses their position of trust, legal action can be taken to protect your interests.
If your attorney wants to use the enduring power of attorney to deal with any real estate, the enduring power of attorney may need to be registered with the Land Titles Office in your State or Territory. There is normally a fee charged for registering an enduring power of attorney.
Even if there is no requirement to register the enduring power of attorney, you may be able to do so voluntarily. By registering it, the enduring power of attorney:
After registration, your original document of the enduring power of attorney will be returned to you with a registration number stamped on it. Your attorney should use this number when signing any documents on your behalf.
You can revoke your enduring power of attorney at any time, provided you have mental capacity to understand what you are doing at the time you revoke it.
It depends on the jurisdiction, but generally the power of attorney can be revoked by notifying the attorney either verbally or in writing that it has been revoked.
It is clearer for everyone if it is revoked in writing, especially if it is registered at your State or Territory Land Titles Office. If you do not notify the attorney about the revocation, the attorney can keep dealing with your finances and property.
After revocation, you should destroy the original and any copies of the enduring power of attorney.
An enduring power of attorney ends:
The enduring power of attorney may also end for more complex legal reasons, such as bankruptcy. You should seek legal advice about these matters.
Download the client guide Why should you have an enduring power of attorney?
Australian Executor Trustees (AET) provides a range of professional estate planning, superannuation, trustee and investment services to clients across Australia. AET assists clients in drafting their Will, preparing an effective power of attorney and providing all the specialist professional services required in estate administration. This document provides general advice only and its recipient should seek professional advice before relying on its contents. AET believes this information to be reliable as at date of issue but excludes all liability to the extent the law allows.