It doesn’t matter if you are old or young, in business or not, if you do a lot of travelling or not, or even if you don’t have many or any assets, there are benefits in having a power of attorney.
You may need someone to manage your financial affairs in case of accident, sudden illness, planned or unexpected absence, or when you become frail aged or lose mental capacity.
What is a Power of Attorney?
A Power of Attorney is a legal document that gives the appointed person, the legal authority to act for you [the principal], and to make legally binding decisions on your behalf.
There are two distinctive types of Power of Attorney.
- GENERAL POWER OF ATTORNEY
A General Power of Attorney is a document whereby you give limited authority to another person to act on your behalf but that authority will not continue if you lose capacity to act on your own behalf. It sometimes is required to operate only for a limited period of time.
It is suitable for business related matters or short-term transactions when you are not personally available to act on your own behalf to complete a transaction or sign paperwork. For instance, if you are travelling away from home and want someone to be able to act for you while you are away, whether to operate your bank account or complete some transaction such as a purchase which requires your authority.
- ENDURING POWER OF ATTORNEY
An Enduring Power Of Attorney gives the attorney the authority to manage your legal and financial affairs, including buying and selling real estate, shares and other assets, operating your bank accounts and spending money on your behalf.
It is intended to operate indefinitely. The attorney’s power continues even if for any reason you lose the mental capacity to manage your own affairs. Once you lose mental capacity you cannot revoke this power of attorney.
If you do not want your appointed attorney to be able to act for you if you lose mental capacity you should only make an appointment by way of a General Power of Attorney.
An attorney under an Enduring Power of Attorney cannot make decisions about your lifestyle or health; these decisions can only be made by a guardian, whether an enduring guardian appointed by you or a guardian appointed by the Guardianship Tribunal. But necessarily to Attorney may need to be involved about any decisions regarding funding your needs if you are unable to make those decisions.
Can I revoke a Power of Attorney?
Yes, you can so long as you have the mental capacity to do so.
Can you limit the powers of your appointed attorney?
You can limit the powers you give under both an Enduring Power of Attorney and under a General Power of Attorney.
Does the Attorney need to be a lawyer?
The person appointed does not need to have legal qualifications – you can appoint anyone although who you appoint should be carefully considered as you are providing them with significant power.
It is important that you trust the person you are appointing as attorney to make financial decisions on your behalf. They must be over 18 years old and must not be bankrupt or insolvent. If your financial affairs are complicated, you should appoint an attorney who has the skills to deal with complex financial arrangements.
The attorney should not intermingle their own finances with the finances of the appointor.
An ideal attorney should:
- be impartial and have no known conflict of interest;
- be able to act in a business-like manner;
- respect the confidentiality of the principal that is the person who appointed the attorney ; and
- live in a geographically convenient location so it is easy for them to act on behalf of the principal when and as required.
Is it better to have more than one attorney?
We recommend that you do have more than one attorney, or a substitute attorney if the appointed attorney cannot act or continue to act, as it gives you more flexibility.
This also applies if you appoint a spouse and a child You can also appoint attorneys to act “jointly” so they must act together or “severally” which means they can act individually even if more than one is appointed.
Should I pay my attorney?
This is not necessary to give legal effect to the appointment, and normally might only be considered if the attorney(s) is a professional.
How do I know if a person has sufficient mental capacity to make a power of attorney?
There is no simple formula, but in general terms they must be able to:
- understand the major consequences of a decision;
- take responsibility for making that choice; and
- make a choice based on the risks and benefits that are important to them.
If there is any doubt about capacity, it’s best to get in touch with a doctor and ask for a written opinion.
Many clients do not recognise the possible benefits (and pitfalls) of Powers of Attorney.
If you do not have a Power of Attorney then you should contact us and find out more.
To find out more about Powers of Attorney and their benefits call us on 02 9699 9877 or email [email protected].