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.
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 the 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 Western Australia, a document appointing an Enduring Power of Guardianship and Advance Health Directives 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 witnessed by two people, one of whom must be a person authorised to witness a statutory declaration in Western Australia, which includes a lawyer.
It is important to be aware that an Enduring Power of Attorney becomes void when you die, so you should also make sure that you have a valid Will in place.
What happens if you lose capacity without having a Power of Attorney?
The difficulty is that no person automatically has the right to manage your assets. Not even if they are your husband or wife.
The possibility of losing capacity is often not properly considered by people. However, it is too late to sign an Enduring Power of Attorney after you develop a mental incapacity such that you are unable to manage your financial affairs, which could be a result of an unexpected incident, such as a car accident.
Unless you have an Enduring Power of Attorney in place before you lose capacity, your loved ones will be forced to make an application to the State Administrative Tribunal for administration orders, which may be costly and time-consuming – especially if your family cannot agree on who should be appointed as the administrator.
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 and continues to be effective during any period in which you do not have legal capacity (Immediate Enduring Power of Attorney).
On the other hand, if you lose the capacity to make such decisions before the date or occasion you name, the power will be effective only during any period when a declaration by the State Administrative Tribunal that you do not have legal capacity is in force (Dormant Enduring Power of Attorney).
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 financial decisions as you do today.
Today, Powers of Attorney are more often used as a precautionary step by sensible adults rather than as a stop-gap measure for an overseas trip. Professional groups such as accountants and financial planners, along with lawyers, all strongly recommend that their clients of all ages and walks of life, make a Power of Attorney so their assets are not locked up if a person loses the legal capacity to sign documents and their loved ones are put through avoidable stress.
If you or someone you know wants to know more, don’t leave it too late, please contact us.
This article was originally published on 9 April 2017 and was significantly revised and updated on 10 April 2019