We only tend to consider the big end-of-life issues when something tragic happens. The loss of a loved one, an unfortunate accident, a health complication. It is only during such times that we think the big, meatier decisions in our life – our legal affairs. We mull over such questions as, “Do I have a will? If so, is it up to date? What will happen if I become seriously ill? Do my relatives know the 4672 passwords I have for all my online accounts? If I enter a coma, who will manage my affairs on my behalf?”
We consider them momentarily, and then go back to our normal lives. After all, during ordinary time, there is little impetus to act and sort out these things. Everything is fine, we say to ourselves…
Until it isn’t.
While these issues are usually associated with the elderly population, it can equally apply to other age groups. For example, someone is travelling abroad and they decide to appoint someone to manage their affairs back home. Or, or a person inexperienced in financial management decides to appoint someone more knowledgeable to handle their financial affairs.
A few hours dedicated to creating the right legal documents to appoint suitable, trustworthy people can have huge practical future benefits. It will save you considerable stress and hardship in the future, particularly where those times are already difficult in themselves.
With that said, this post will give an overview of the Power of Attorney in NSW – what it is, how it works, and why it may be appropriate to have one.
Power of Attorney – what is it?
A power of attorney is the legal appointment of someone (“the attorney”) to manage the legal and financial affairs of someone else (“the principal”), when they cannot do so themselves. It is trust that forms the basis of this legal relationship. That is, the principal appoints someone they genuinely trust and can rely on to act in their best interests when the time calls for it.
The attorney is not permitted to act in any way other than the principal’s best interests. Broadly speaking, they can’t satisfy their own self interests at the expense of the principal, unless it is provided for in the legal arrangement (e.g. the principal may agree that that attorney can use their finances to cover reasonable living expenses).
What is the concept of “capacity”?
Capacity is a legal concept which encapsulates a person’s ability to comprehend the legal relations they are entering to. For example, a person with a Blood Alcohol Level of 0.125 does not have the capacity to enter into a lease agreement, and neither does or a 5 year old child. Capacity can be affected by different things such as age, inebriation, and cognitive impairment.
In this area of law, it is typical that an elderly principal will lose the capacity to make decisions arising from an onset of dementia or other such cognitive impairment. As will be discussed below, choosing the correct form of power of attorney will ensure that the desired outcome is reached.
The different types of powers
A power of attorney can be made in different forms, each depending on whether the principal is able to make the decisions for themselves. These are: –
- Ordinary Power of Attorney – the attorney’s power will either end on a date specified in the legal document, or when the principal becomes incapacitated.
- Enduring Power of Attorney – the attorney’s power will continue and remain active upon the principal becoming incapacitated.
Can more than 1 attorney be appointed?
Yes.
You can appoint more than one person to be your attorney. If doing so, it is important to consider the following: –
- Will they be required to make decisions jointly, or independently of each other?
- How will their responsibilities be delegated? Will one attorney have authority for certain decisions and not others?
- Do you want the attorneys to retain their power of attorney if the other/s fall incapacitated?
The answers to these questions will determine whether the attorneys hold their powers jointly, or jointly and severally. If this applies to your situation, it is best to speak with a solicitor to ensure the drafting of the document fulfils your intentions.
What types of things will my power of attorney be able to do on my behalf?
Your power of attorney will be able to do such things on your behalf such as: –
- Sign legally binding documents.
- Operate bank accounts.
- Pay bills.
- Buy and sell real estate.
- Manage investments.
- Collect rent.
What is the difference between Enduring Guardianship and a Power of Attorney?
A power of attorney relates to the making of financial and legal decisions on behalf of the principal, whereas an enduring guardianship relates to the making of wellbeing-related (medical, health) related decisions on behalf of the principal.
When will the power of attorney start?
You have a few options as to when the appointment will start (and end). Some of these are: –
- Stating the start and end date on the legal document.
- When the principal becomes incapable of managing their own affairs, or;
- Immediately upon the document being executed.
- An end date may be stipulated in the legal document.
If the power is to commence when the principal becomes incapacitated, it would be prudent to factor in how their capacity is to be assessed. For example, the opinion of a medical professional may be required before the attorney begins making decisions on the principal’s behalf.
Aside from handing legal and financial affairs, is there anything else the appointed attorney can do?
Yes, there are various other functions they can perform, for example: –
- Giving gifts. You may wish for the attorney to use your finances for the purchasing of gifts. An example would be for big milestone life events (e.g. birthdays, weddings).
- Giving donations. You may wish for your attorney to use your finances to give donations as you ordinarily would.
- Pay for reasonable living expenses. As an exception to the general rule that an attorney should not act for their own benefit alone, you may “allow” them to use your finances to meet their own reasonable living expenses
………..
And so, we hope this post was helpful in providing a brief overview as to the power of attorney. If you’ve made it this far and are thinking, “Yeah… I guess I probably should get my affairs in order” – we would love to help you out.
You can message me on 0406 111 992 for a no-obligation consultation, or send an email at hello@fuenteslegal.com.au
** Disclaimer: the content in this post is general information only and not to be taken as legal advice.
