A Power of Attorney (sometimes referred to as a Financial Power of Attorney although not a legal term) is a document which enables you to appoint someone (“the Attorney”) to manage your financial and legal affairs when you are unable to do so.
There are Enduring Powers of Attorney or General Powers of Attorney. Both documents become ineffective if you die.
The Power of Attorney that we usually use is the Enduring Power of Attorney. In this article we will look at:
the difference between a General Power of Attorney and Enduring Power of Attorney;
the powers of the Attorney;
when a Power of Attorney operates;
specific powers you can include in your Power of Attorney;
revoking a Power of Attorney, and more.
The appointment of someone to make decisions on your behalf related to your wellbeing as opposed to your financial and legal affairs (sometimes commonly referred to as a Medical Power of Attorney), is called an Appointment of Guardian in NSW. You can read more about this in our article “What is an Appointment of Guardian?”.
What is an Enduring Power of Attorney?
An Enduring Power of Attorney means that you intend the Power of Attorney to continue to be effective, even if after you have signed it, you might lose mental capacity (such as by being in a coma, suffering memory loss, dementia and so on). The benefit in having an Enduring Power of Attorney is that the Attorney can continue to look after your financial affairs (not your medical and wellbeing decisions), even though you may not be aware of what is happening.
What is a General Power of Attorney?
A General Power of Attorney ceases to be effective if you lose mental capacity. If you signed a General Power of Attorney (rather than an Enduring Power of Attorney) and you subsequently lose mental capacity, then you may be left without someone to manage your financial and legal affairs. Therefore, a General Power of Attorney is generally only used for a specific purpose.
For example, if you were going overseas and could not sign off on documentation to settle the sale of your property, then you may appoint an Attorney under a General Power of Attorney which specifically only appoints that Attorney to assist between the dates you are overseas and only for the purpose of assisting with the settlement of the property.
However, the Courts have traditionally been very conservative in interpreting a Power of Attorney that has been drafted for a specific purpose. Where there is any doubt as to whether the action under the Power of Attorney is authorised, due to the very specific wording of that Power of Attorney, then the Court may prefer to not allow a certain action rather than allow it. This can make the drafting of a Power of Attorney for a specific purpose difficult, time consuming and of course, complicated in order to ensure the Power of Attorney is effective.
What powers does an Attorney have?
Both the General Power of Attorney and Enduring Power of Attorney create the power for the Attorney to do, on your behalf, “anything that you may lawfully authorise an attorney to do” unless the Power of Attorney document specifically limits some of these powers.
This means that the Attorney can do, for example, the following:
sign cheques on your behalf;
withdraw money from your bank accounts;
deposit money into your bank accounts;
buy or sell shares for you;
buy or sell real estate for you;
enter into legal agreements on your behalf (such as leases, licences or other contracts) and so on.
There are two exceptions to the available authority granted under a Power of Attorney:
The Power of Attorney will not be effective in delegating to another person any responsibility you have as a Trustee. This includes where you are an Executor of a deceased estate. Separate laws relate to delegation of authority as a Trustee.
The Power of Attorney equally will not be effective to delegate your authority in your capacity as a Director of a company. Delegation of authority by a Director is governed by the Corporations Act.
When does the Power of Attorney commence to operate?
When putting in place a Power of Attorney, you need to decide when you would like it to operate. The options are:
When the Attorney considers you require assistance;
Or when a Doctor determines you are not capable of managing your own financial affairs.
Making the Power of Attorney operate immediately does not mean that you lose control over your own financial affairs. It simply enables the Attorney to act for you at any time. This can be important if, say, you are overseas and you need some financial arrangement completed during your absence.
If the Power of Attorney is only to operate when the Attorney considers that you cannot manage your own financial affairs, then the main issue is determining when that might arise. If the Attorney is faced with making that decision, the Attorney would have to obtain a written medical opinion from your treating doctor to verify that you were not capable of making your own decisions related to finances and legal matters.
It’s important to note that any company or government authority would also require that sort of evidence to establish that you were not capable of managing your own affairs and that the Attorney could then act on your behalf by using the Power of Attorney.
In deciding when you wish for the Power of Attorney to commence, you may wish to consider circumstances where you are physically unable to manage your affairs even though you are still mentally capable.
For example, we have elderly clients that hand control over to their children as they are physically ill or unable to manage their affairs (cannot attend the bank, have poor eyesight for dealing with documentation etc) even though they are still mentally capable. This can be difficult to achieve if you sign a Power of Attorney that does not commence until the Attorney or doctor considers that you are not capable of managing your own financial affairs.
Can I have more than one Attorney?
You can appoint as many Attorneys as you wish but more than 3 can become unworkable.
Where you wish to appoint more than one Attorney, then you need to make a decision as to whether the Attorneys are to act jointly or jointly and severally.
“Jointly” means that the Attorneys must all sign documents or act together on your behalf.
“Severally” means that either or any of the Attorneys may act on your behalf in signing documents and so on.
Where reference is made to “Jointly and/or Severally”, then both options apply.
You can also make provision for a Substitute Attorney or Attorneys in case the first appointed Attorney or Attorneys are unable to be your Attorney due to sickness, disability, death or unwillingness to act.
If you appoint more than two Attorneys, then you may decide that you wish for a majority rules type approach; for example, two out of the three Attorneys must act together.
What other specific powers can I have in the Power of Attorney?
Authority to give gifts
The Powers of Attorney Act now allows you to specifically authorise the Attorney to make gifts from your assets:
to relatives and/or close friends of a seasonal nature or because of a special event (for example, a birth or a marriage);
as a donation, of the nature that you might make if you were making the decision yourself.
Confer benefits on the Attorney
You can authorise the Attorney to take a benefit from your assets to cover the reasonable living and medical expenses of the Attorney.
For example, a husband can allow his wife, who is also acting as Attorney, to access a bank account in the husband’s name alone to pay for the wife’s reasonable living and medical expenses.
Confer benefits on others
You can authorise the Attorney to pay the reasonable living and medical expenses of a person nominated by you.
For example, a husband can allow his Attorney to confer benefits on his son, who has an intellectual disability and financially dependent on him, to pay the son’s reasonable living and medical expenses.
Registering a Power of Attorney
You do not need to register a Power of Attorney unless your Attorney needs to use the Power of Attorney to deal with property (for example, if they were going to buy, sell, lease or mortgage any property on your behalf).
The Power of Attorney does not need to be registered to deal with banks, share registries and most asset bodies and government departments.
Once you have executed your Power of Attorney, we do not register it. This is because most of the time, your Attorney will never need to use the Power of Attorney for property and therefore, we save you the cost of having to register the Power of Attorney. Further, if your Attorney does need to use the Power of Attorney for property at some stage in the future, then we can arrange registration of the Power of Attorney within a few days.
Revocation of a Power of Attorney?
There are three ways to revoke a Power of Attorney:
Express revocation. The Power of Attorney will be revoked if you tell the Attorney that you revoke the Power of Attorney. Rather than rely on verbal communication, we recommend you sign a written Revocation and provide a copy of it to the Attorney.
If you die, then the Power of Attorney automatically ceases. After your death your affairs are managed by the Executor appointed in your Will.
Overriding legislation. If your Attorney does not act correctly on your behalf then legislation can allow for the Power of Attorney to be automatically revoked.
Power of Attorney compared to Appointment of Guardian
A Power of Attorney is different to an Appointment of Guardian.
An Appointment of Guardian enables you to appoint someone (“the Guardian”) to make decisions relating to your welfare and including health and medical decisions during a period when you are unable to make those decisions.
You can only make an Enduring Power of Attorney by having your execution of the document witnessed by a lawyer (or other authorised persons). That witness must provide a certificate to the effect that advice has been given as to the effect of the granting of the Power of Attorney.
The Attorney(s) appointed under the Power of Attorney need to sign their acceptance before they can sign documentation and make decisions on your behalf. The Attorney(s) acceptance does not need to be witnessed by a solicitor and can be signed at any time after you have signed the Power of Attorney.
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