When you give someone power of attorney, you give them the power to make decisions on your behalf.
These include decisions that involve the law and your finances, from managing your bank accounts to selling properties to entering contracts.
There are two types of power of attorney - general power of attorney and enduring power of attorney.
A general power of attorney applies when you appoint someone to make decisions for you, usually for a specific reason or period, and while you retain mental capacity. For example, you might move to a foreign country for a year and appoint a power of attorney to manage your finances in your home country while you’re away.
If, at any point, you lose your mental capacity, a general power of attorney ceases to apply.
An enduring power of attorney applies when you appoint someone to make decisions for you, should you lose mental capacity. For example, you might experience an illness, such as a stroke, or an accident, such as a car crash, that causes permanent brain damage. One of the most common reasons that older people invoke their enduring power of attorney is the onset of dementia.
An enduring power of attorney ceases to apply at your death. This means it doesn’t affect your will.
It’s up to you to decide how much power you give to a power of attorney. For example, if you appoint a general power of attorney because of a one-off event, such as an overseas trip, they could be given very limited and particular powers, such as the power to sell an investment property.
However, if an enduring power of attorney is appointed to make decisions for you in old age, in case, for example, you are diagnosed with dementia or any other loss of mental capacity, they could be given more wide-ranging powers. These might include the powers to open and close bank accounts, manage superannuation, and enter into contracts with health care providers, such as aged care facilities.
A power of attorney may have whatever power you give them to make legal and financial decisions on your behalf. This applies to both a general power of attorney and an enduring power of attorney.
Whether or not a power of attorney may extend to medical, health and lifestyle decisions varies from state to state.
A legal professional that specialises in wills and estate planning in your state should be able to provide detailed advice of what you need and how to set up either a general power of attorney or an enduring power of attorney in your state.
It’s very important that the power of attorney nominated is someone you trust because a power of attorney, particularly an enduring power of attorney, may make life-changing decisions on your behalf. For most people, this is a partner, life-long friend or relative, such as a child.
A supplementary power of attorney can also be nominated to step in if your original power of attorney becomes ill, has an accident or dies. For example, a partner or spouse may be your power of attorney and two of your children are joint supplementary powers of attorney.
To establish an enduring power of attorney, you must be at least 18 years old. In addition, you must have the mental capacity to understand the significance and consequences of your decision.
You will need to complete and sign an enduring power of attorney document in the presence of someone legally qualified to act as a witness, such as a solicitor, barrister, licensed conveyancer or employee of the public trustee of the state. This witness must also sign a document which states that they explained the enduring power of attorney to you, and that you understood the explanation. Those named in the document will also be required to sign the document indicating acceptance of their responsibilities.
Establishing your power of attorney is just one element in the big picture of forward planning. This can be done alongside writing (or reviewing) your will, as well as checking on your insurance policies, particularly life insurance and funeral insurance which can help ensure your family has the financial support they may need when you’re gone.
By taking care of these matters while you’re healthy and well, you can ensure your loved ones will know what you want for the future—and be in a position to fulfill your wishes.
To prepare for the future, learn more about our life insurance and funeral insurance products, or get an online quote.