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 can deliver or the types of Powers of Attorney that exist.
In this article we examine why appointing a Power of Attorney is often recommended by lawyers and explain the difference between a General Power of Attorney and an Enduring Power of Attorney. The information relates to South Australian law and is not a substitute for legal advice. For advice tailored to your specific circumstances, please consult an experienced legal professional.
Power of Attorney – overview
A Power of Attorney is a useful legal document used to allow someone to handle your financial and legal 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 financial affairs.
Powers of Attorney in South Australia deal with financial and legal decision‑making only, not personal, lifestyle or medical decisions. Separate documents, such as an Advance Care Directive and guardianship arrangements cover personal, lifestyle or medical decisions.
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 certain things you would normally do yourself, such as signing documents, paying bills and banking. The person you choose has the right to stand in your shoes and make decisions regarding your financial and legal affairs.
Given the power of such an appointment, it is critical that you select the right person to act in that capacity. The person does not have to be a lawyer. 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 and have the ability to manage financial matters responsibly.
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 act on certain 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 legal 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, except that the power continues, or “endures”, in the event the donor (the person making the power) later loses legal capacity, provided the document is made in the correct enduring form.
In South Australia, an Enduring Power of Attorney must be made in the prescribed form and properly witnessed by an authorised witness (for example, a legal practitioner or Justice of the Peace), who should be satisfied that you understand the nature and effect of the document before you sign it.
It is important to be aware that an Enduring Power of Attorney becomes void when you die. At that point, control of your estate passes to your executor or, if there is no will, to an administrator appointed by the court.
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 generally begins immediately once the document has been properly signed and witnessed.
Alternatively, you can specify that an Enduring Power of Attorney is only to take effect if you later lose legal capacity, for example after a doctor confirms that you can no longer manage your financial affairs and make financial decisions.
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, unless and until a tribunal or court orders otherwise.
You may revoke a General or Enduring Power of Attorney at any time while you still have legal capacity, by signing a revocation document and notifying your attorney and relevant institutions (such as banks) of the revocation.
What happens if you lose capacity without having a Power of Attorney?
The probability that someone can lose capacity is often not considered. However, if you become legally incapacitated and are unable to manage your financial affairs and no longer understand the effect of an Enduring Power of Attorney, it will be too late to have a lawyer prepare one.
No one has an automatic general right to manage your assets if you lose capacity, even a husband or wife, beyond what they can do in their own name or under existing joint arrangements. This can have a significant effect on financial decision‑making with respect to your bank accounts, home, shares or other jointly owned assets or liabilities.
To have decisions made in these circumstances usually involves an application to the South Australian Civil and Administrative Tribunal (SACAT) for an administration order.
The applicant, usually a family member, would apply to become your financial administrator. This is subject to that person being considered a suitable (“fit and proper”) person to manage your affairs. If no suitable person is available, or in some cases even where there is a willing family member, SACAT may instead appoint the Public Trustee or another appropriate administrator to manage your affairs.
If the Public Trustee is appointed, your spouse or other family members may need to consult with a government agency to deal with your ongoing financial affairs until your death, and fees may be charged for this service.
SACAT or an administrator appointed by SACAT can, in some circumstances, vary or revoke an existing Enduring Power of Attorney if that is in your best interests.
Summary
Today Powers of Attorney are often used as a precautionary step by sensible adults, not just a stop‑gap measure for an overseas trip. Professionals such as accountants, financial planners and lawyers often recommend that their clients of all ages and walks of life make a Power of Attorney to ensure their assets are not effectively locked up if they lose legal capacity and to minimise stress on their loved ones.
This is general information only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].