Owen Hodge Lawyers specialise in all areas of Wills and estates, including Power of Attorney
There may come a time when you need to appoint someone to legally act on your behalf. In such situations, a Power of Attorney (also known as POA), can be created. When appointed, a Power of Attorney can make decisions regarding your financial, medical or personal affairs.
However, it is important to note that there are three types of power of attorney that you can create for your benefit and the benefit of your estate. Each of these powers of attorney are different and define distinct events and manners of use. Depending upon your individual needs, you will want to carefully select the appropriate power of attorney for you.
What Mental Capacity Do You Need to Exhibit to Create A Power of Attorney?
To be able to create a valid and enforceable Power of Attorney, you must also have ‘full legal capacity’. This means you must understand:
- What you are signing
- The nature and extent of your estate
- That the POA will have authority to deal with your financial, medical and personal matters
Types of Power of Attorney
There are three types of Power of Attorney formats you can use when appointing a Power of Attorney. These include:
- Enduring Power of Attorney
- Limited Power of Attorney
- General Power of Attorney
What Is A General Power of Attorney?
A general Power of Attorney is a legal document giving the person you appoint the power to do anything in law that you can do. A power of attorney is usually given when someone is of sound mind but cannot be available to act on their own behalf. Some examples of what a designed power of attorney can do includes; paying bills, buying and selling real estate or shares, opening and operating bank accounts and entering into and participating in litigation on your behalf. It is important to remember that a power of attorney which is granted when you are of sound mind will automatically be revoked if you become mentally incapacitated or of unsound mind.
What is an Enduring Power of attorney?
An Enduring Power of Attorney is a power of attorney that remains effective even if you lose your capacity to make sound decisions or find yourself in a situation of mental decline. Examples of such a situation include experiencing senile dementia or Alzheimer’s disease. This can also include a medical state, such as a coma, that cause you to be incapacitated and unable to take care of your own finances for a period of time
What is a Limited Power of Attorney?
According to custom a Limited Power of Attorney is allowed to make legal decisions on your behalf for specifically identified and described events or activities. This power is as its name indicates; Limited. As such, you have the right to identify and describe the types of legal decision-making powers you are entrusting to another individual. If there is an event or a decision that is not defined as one which the Limited Power of Attorney covers, then the person holding the Limited Power of Attorney will not be allowed or authorized to act on your behalf.
How Do I Appoint A Power of Attorney?
You can create a Power of Attorney by three means of action:
1. Through a Public Trustee
- This may also be known as a NSW Trustee & Guardian. Persons working in this capacity can assist you at no cost to you if you meet the necessary requirements. If you do not meet the requirements, they can still work with you for a fee.
2. By hiring a Power of Attorney lawyer
- Because creating any form of a Power of Attorney has significant consequences, we highly recommend using the services of a solicitor who specializes in this area of law.
3. Using a do-it-yourself kit
- There are several on-line power of attorney kits available for individuals to create their own power of attorney. While this might appear to be a way to limit the financial costs of creating this document, it is not recommended you do so without proper advice from a solicitor first.
4. Online services
- There are also various online services that will provide you with the necessary paperwork to complete a power of attorney. But again, unless you have done a significant amount of research and are quite clear as to the purpose of your power of attorney designation, it is best to seek the advice of a solicitor.
Frequently asked questions
The power given can be limited to a specific purpose, e.g. operating a bank account or selling real estate, or be a general power that permits the Power of Attorney to carry out any business you can lawfully carry out.
Additionally, in order to more specifically control an attorney’s action, the new Act states that a Power of Attorney cannot authorise a gift of all or any of the principal’s property unless such authority is clearly outlined in the document. There are also provisions to protect beneficiaries against the possible disposal of testamentary gifts or assets by the attorney prior to the death of the person granting the power.
A Power of Attorney can do any of the following designated duties;
- Make decisions for you that consider your wishes and desires
- Manage your current finances including paying bills
- Keep your assets safe from being accessible by those you have not designated as needing your financial assistance
- Acting in good faith and with due diligence in protecting your assets
- Work cooperatively with those that you share a financial interest with
- Allow for you to remain a part of the decision-making process as you see fit and necessary
- To act within the powers that you have assigned them and nothing more
In the past, the person granting the power was the only person required to sign the document. The new legislation however, requires both the person granting the power and the person nominated as enduring attorney to sign and accept the conditions outlined in the document.
It is important to note that the Enduring Power of Attorney instrument does not become operational until the nominated attorney has accepted the appointment and signed the document. This new requirement applies to Enduring Powers of Attorney and does not apply to ordinary Powers of Attorney.
The legislation also allows for some uniformity across Australia. The Act recognises Powers of Attorney made in other States and Territories.
The Act also gives the Guardianship Tribunal and the Administrative Appeals Tribunal a broader range of authority when dealing with matters such as:
- The capacity to make a Power of Attorney
- Breaches of the Trustee Act
You may select any adult who has the capacity to make sound decisions on your behalf. This can include a friend, family member, family attorney, the executor of your Will, or a business person that you have a trusting relationship with.
For a General Power of Attorney, the duration is until the creator revokes the powers or if the creator becomes mentally incapacitated.
For an enduring power of attorney, the document will remain in effect from the date of inception, through and including, if the person who created the enduring power of attorney should become incapacitated.
For a Limited Power of Attorney, the document will only allow for the designated decision-maker to do so for those events and/or decisions that are specifically stated in the Limited Power of Attorney. This Limited Power of Attorney can be revoked by the maker at any time.
The one Power of Attorney which can carry with it some risks are the Enduring Power of Attorney. This is because this type of power of attorney document is non-revocable. When entering into this type of agreement you are giving permanent decision-making power, over your finances, to someone else. In doing so, there is always the risk of financial abuse.
In general, when this happens, the Power of Attorney is automatically revoked. You then must elect a new person to take over as your Power of Attorney and a new document must be drafted.
While there are costs involved in preparing a Power of Attorney, such costs should not be a deterrent to creating a Power of Attorney. There are various ways in which a Power of Attorney can be drafted and varying costs depending upon your particular needs.