Most people have heard of a Power of Attorney, however, most do not fully understand the extent of its power, the benefits it delivers or the types of Powers of Attorney that exist.

A Power of Attorney is a useful legal document which can be used to authorise a person to handle your affairs in a variety of different circumstances, such as when you are planning to go overseas, planning an extended holiday, suffering from poor health, have had an accident or when you have reached a stage in your life when you need assistance to adequately manage your affairs.

In this article we examine why appointing a Power of Attorney is so strongly recommended by lawyers and explain the difference between a General Power of Attorney and an Enduring Power of Attorney.

Selecting a person to act in your place

Appointing an Attorney enables that person (or people) appointed to act in your place, and do the things you would normally only be able to do yourself, such as signing documents, paying bills and attending to your financial affairs. Your Attorney has the right to stand in your shoes when you wish them to attend to your affairs, and they can also enter into legally binding agreements in your name and on your behalf.

Given the nature of the power given to your Attorney, it is therefore critical that you choose the right person to act as your Attorney. Your Attorney does not have to be a lawyer, they simply need to be over the age of 18, and a person that you trust.

The difference between a General and an Enduring Power of Attorney

Not all Powers of Attorney are the same.

A General Power of Attorney gives your Attorney the authority to make decisions about your financial and legal matters on your behalf. The power granted pursuant to a General Power of Attorney is only in effect while you have mental capacity, and ceases to operate if you lose the mental capacity required to make decisions.

This kind of Power of Attorney is often used for convenience, for example, to enable you to appoint a person to manage your financial and legal affairs at home while you travel overseas.

An Enduring Power of Attorney is similar to a General Power of Attorney except that the powers continue, or endure, even if you lose mental capacity.

In Western Australia, “Enduring Powers of Guardianship” and “Advance Health Directives” can be used alongside an Enduring Power of Attorney to authorise a person to make medical and health decisions on your behalf.

In order to be legally valid, an Enduring Power of Attorney, unlike the General Power of Attorney, must be explained to you by a lawyer.

Whether it be a General Power of Attorney or an Enduring Power of Attorney, it is important to note that either kind becomes void and invalid upon your death.

What happens if you lose capacity without having a Power of Attorney?

People don’t really think about what will happen if they lose their mental capacity. If you do not have an Enduring Power of Attorney in place and then you lose your mental capacity insofar as you are unable to manage your financial and personal affairs, it is too late then to have a lawyer prepare a Power of Attorney for you, as you will no longer have the mental capacity to sign it.

This can have a colossal effect on all the financial decision making thereafter with respect to your financial and personal affairs, including with respect to your bank accounts, your home, shares, and any other assets, including jointly owned assets or liabilities you may have, as not even your husband or wife is legally entitled to do so without a valid Power of Attorney.

In such a situation, a person would need to make an application to the State Administrative Tribunal (SAT) for an administration order that they are appointed as your Attorney to carry out such activities on your behalf.

A person appointed under a SAT administration order will have the same responsibilities as an attorney appointed under a Power of Attorney document, however, the decision about who will be appointed will be made by the State, not by you personally.

That person appointed will be required to submit annual accounts to the Public Trustee for auditing, and this could incur substantial costs.

When does the Attorney’s power begin?

When you appoint your Attorney, you are able to nominate the date or occasion when your Attorney’s power shall commence, and in lieu of doing so, the power of appointment will commence immediately and continue to be effective both while you have mental capacity, and after you lose it (Immediate Enduring Power of Attorney).

In the event you have stipulated that the power of appointment will only come into effect upon you losing mental capacity, in order to act under the Power of Attorney, your Attorney will need to obtain a declaration from the State Administrative Tribunal that you have lost mental capacity, and the power is therefore in force (Dormant Enduring Power of Attorney).

It is important to note that even if you give your Attorney power immediately, you continue to be able to make decisions yourself while you have mental capacity. The making of a Power of Attorney does not restrict your powers in respect of your financial and personal affairs, nor does it result in you giving up the right to make such decisions as you do today.

Summary

Powers of Attorney are used as a precautionary step by sensible adults. Professional groups such as accountants and financial planners, along with lawyers all strongly recommend that their clients of all ages and walks of life have a Power of Attorney in place so their assets are not “frozen” if they lose legal capacity to sign documents and so that their loved ones are not put through avoidable stress.

If you or someone you know want to know more don’t leave it too late, please contact us to arrange an Introductory Consultation on (08) 9335 9877 or email reception@frichot.com.au

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