Most adults over 18 should consider having a Power of Attorney in place.
A Power of Attorney is a legal document made by a person (the principal). It authorises one or more people (the attorney) to act on the principal’s behalf.
The document defines what the attorney can do. This can range from a single task, such as signing a contract, to managing all financial and legal affairs.
This article explains the types of Powers of Attorney, their limitations, and why they are important.
When and why should I make a Power of Attorney?
A person usually makes a Power of Attorney when they need someone to act for them. This may happen when they are travelling or unavailable.
It also helps if a person wants to appoint someone they trust to manage their affairs if they lose capacity.
None of us can predict the future. A Power of Attorney helps ensure someone can manage your legal and financial affairs when needed.
You cannot make a Power of Attorney after losing mental capacity. This may occur due to illness, injury, dementia, or other medical conditions. For this reason, you should make one early while you are well and able to choose your attorney carefully.
Types of Powers of Attorney
A Power of Attorney can be tailored to suit individual needs. You can set limits on what the attorney can do and when the authority starts.
For example, you can make it active only after a specific event, such as travel overseas.
A General (non-enduring) Power of Attorney allows an attorney to manage financial and legal matters. It stops if the principal loses capacity. It can also be limited to specific tasks, such as selling property or managing bills for a set time.
An Enduring Power of Attorney continues even after the principal loses capacity. It may cover personal, financial, or legal matters. Couples often appoint each other for convenience.
Once an Enduring Power of Attorney is activated after incapacity, it cannot be revoked.
The Power of Attorney ends when the principal dies. After death, the Will or intestacy laws apply.
Who should be appointed as an attorney?
Most adults over 18 can be appointed if they understand the role. However, they must not be care workers, health providers, or accommodation providers for the principal. A bankrupt person cannot act as an attorney.
A person with a dishonesty offence may also be restricted unless the offence is disclosed in the document.
You should choose your attorney carefully. This role involves trust and responsibility.
Most people appoint a spouse or partner. Others may choose an adult child, relative, or trusted friend.
Consider the person’s ability to manage financial and legal matters. Some situations are simple, while others involve complex decisions or business affairs.
If you appoint more than one attorney, you must decide how they will act.
Attorneys can act jointly and severally, meaning either can act alone. They can also act jointly, meaning both must agree on all decisions. Joint appointments offer more control but less flexibility.
You should also decide if a surviving attorney can continue after the other dies.
What is the role of an Attorney?
An attorney must act in good faith and in the best interests of the principal.
They should involve the principal in decisions where possible and follow their known wishes.
An attorney usually cannot receive payment, gifts, or benefits unless the document allows it.
They must also keep clear records and manage accounts responsibly.
Can a Power of Attorney be used in different States and Territories?
Most Australian states and territories recognise a valid Power of Attorney from another jurisdiction. However, rules can vary.
If you expect interstate use, you should get legal advice to confirm compliance.
If you need someone to make health or medical decisions, you may also need an Enduring Power of Attorney (Medical Treatment).
Summary
A Power of Attorney lets you appoint someone you trust to manage your affairs. It can apply for a short time or continue if something unexpected happens.
Once you lose capacity, you cannot create a Power of Attorney. Even temporary incapacity can create complications. This is why early planning is important.
If you need advice, contact us on (03) 9422 5439 or email [email protected].