What is a Power of Attorney?
What would happen if, as a result of illness or injury, you became unable to manage your own affairs? Or if you went overseas for an extended period of time, who would look after your affairs?
A power of attorney (PoA) allows you to appoint someone you trust to make financial decisions on your behalf, either on a temporary or a permanent basis and in line with the limits and conditions you put in place. Duties include operating a bank account, paying bills, collecting debts, voting at meetings and signing documents.
To make a PoA, you need to have mental capacity and understand the nature and effect of the power you are granting to that person. When you die, the PoA document ceases to have effect and your affairs will be managed, and your assets distributed, according to the instructions in your Will.
The problem with a PoA is when you lose legal capacity, it lapses as well. You may wish to consider an enduring power of attorney.
What is a Enduring Power of Attorney?
An enduring power of attorney (EPoA) can be effective immediately or held for use only if a person suffers a legal incapacity. In the latter case, it may also be activated by the person making it if they provide a written and signed authority.
An EPoA must be signed while a person still has legal capacity.
It will remain effective even though they may subsequently suffer loss of capacity due to disability or illness. Once capacity is lost through disability or illness, an EPoA cannot be created nor can it be revoked unless a successful application is made to the relevant state-based court or tribunal.
An EPoA is a powerful tool that you are giving to someone. You must have utmost and complete trust that the person you nominate will always act in your best interests and will not follow their own agenda.
Commonly, husbands and wives or long-term partners give the power to each other so that if one were incapacitated, the other could continue to manage the joint affairs or sell property if it were needed. It can be tailored to best suit your needs and circumstances.
Medical Power of Attorney
An MPoA is limited to the consent or refusal of consent to medical treatments. You can be specific with the types of treatments you do or do not want to have.
Unlike a power of guardianship, you cannot have more than one person at a time being able to act on your behalf. You need to state names in order of priority. In most cases, you will not need an MPoA if you have an EPoG as it duplicates what the guardianship documents already cover.
Important: Some states have different rules in this area and you should discuss this with your financial adviser and solicitor who is an estate planning specialist. For example, in New South Wales, an MPoA does not exist and you can have an ‘advance health directive’ that is usually contained within your enduring guardianship. Most importantly, if you want to ensure your wishes are carried out after you can no longer make medical decisions yourself, then an MPoA or advance health directive needs to be established.
For example, in Victoria you need an Enduring Power of Attorney (Guardianship) and an Enduring Power of Attorney (Medical). In both Enduring Powers of Attorney (Guardianship & Medical) you can only appoint one person in the first instance and one person in the second instance. You are unable to have joint appointments.