1. What is a power of attorney?
A power of attorney is a formal legal document by which you (known as the principal) can confer power or authority on one or more persons (the attorney/s) to make decisions about your property or financial affairs.
a. What is an enduring power of attorney?
There are two types of powers of attorney:
A general power of attorney, and
An enduring power of attorney.
The difference between the two is that a general power of attorney ceases to have effect when you lose legal capacity, that is, when you become of unsound mind, while an enduring power of attorney will continue to operate even when you lose legal capacity. Once you lose legal capacity you cannot revoke your enduring power of attorney. There are also strict guidelines relating to the form and execution of an enduring 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 by an enduring guardian appointed by you through an appointment of enduring guardian document or by the Civil and Administrative Tribunal or the Supreme Court.
2. How does it work?
Any adult can make an enduring power of attorney if they are capable of understanding the nature and effect of the document. Capability means that the person understands the range of decisions which the attorney is authorised to make under the enduring power of attorney.
If there is any doubt about whether a person has the capacity to make an enduring power of attorney, then an appropriately qualified medical practitioner should assess the person’s understanding before an enduring power of attorney is made.
a. Giving instructions
Who should I appoint as my attorney?
Your attorney has enormous power over your affairs and so the decision to appoint an attorney is an important one. You should choose an attorney whom you trust and who will manage your finances and property responsibly.
Family members, spouses and close friends are commonly appointed as attorneys, or you may wish to appoint a professional attorney such as an accountant or financial planner.
How many attorneys can I appoint?
You can appoint more than one attorney. However, when appointing more than one, you should choose people that can cooperate with each other and work together in your best interests.
You can appoint your attorneys to act:
Jointly and severally (the attorneys can act together or separately);
Severally (the attorneys can act separately); or
Jointly (the attorneys must agree on all decisions).
If you appoint the attorneys to act jointly and severally or severally then the enduring power of attorney continues even when one of the attorneys can no longer act.
However, if you appoint your attorneys to act jointly and one of the attorneys can no longer act for some reason, e.g. because of death or incapacity, then this will automatically end the enduring power of attorney unless you specify otherwise.
What powers can I give an attorney under an enduring power of attorney?
Generally speaking, you can give your attorney the power to make any decision or do anything about your finances or property which you could do yourself. This includes, for example, buying and selling property, making investments, mortgage real estate, operating your bank accounts and buying or selling shares on your behalf.
You may also choose to allow your attorney to use your money and assets through additional powers, for example you may authorise your attorney to confer benefits on the attorney to meet their reasonable living and medical expenses.
Alternatively, you may also control the power given to the attorney by placing limits or conditions in the enduring power of attorney document. For example, you may simply authorise the attorney to pay regular bills, but not to sell any property.
b. When does an enduring power of attorney take effect?
You may choose for your enduring power of attorney to operate once:
your attorney has accepted their appointment by signing the document;
a medical practitioner considers that you are unable to manage our affairs (and provides a document to that effect); or
once your attorney considers that you need assistance managing your affairs.
You may also choose an alternative time or event at which you would like your enduring power of attorney document to take effect. However, if no option is selected or the options chosen are unclear or inconsistent, the default will be once your attorney has signed the document.
c. When does an enduring power of attorney cease to have effect?
An enduring power of attorney ends:
by way of a Court Order;
when you revoke it;
when your attorney dies or can no longer act as your attorney;
where you have appointed multiple attorneys jointly and one of them has died or can no longer act as your attorney; or
on your death.
d. Can the enduring power of attorney operate outside of NSW?
An enduring power of attorney granted in NSW for overseas use may be valid, but it should be legalised in the country of use and that validity is dependent on the law of the particular country.
An enduring power of attorney granted in NSW and sought to be used in another State or Territory of Australia should be valid, but you should be aware that the interstate recognition procedure applies in most but not all States and Territories.
If an enduring power of attorney was granted in another State or Territory of Australia, it is valid in NSW if it is valid under the law of the State or Territory it was made in and the interstate recognition procedure is followed. A power of attorney granted overseas can operate in Australia, but it is desirable that it is attested by a Notary here and it will not operate as an enduring power of attorney here.
e. Using the enduring power of attorney to deal with real estate?
If you/your attorney wants to use the enduring power of attorney to deal with any real estate, then in most cases the enduring power of attorney must be registered with Land Registry Services NSW.
3. The Duties and Responsibilities of an Attorney
The attorney has a responsibility to always act in the best interests of the principal. This means that the attorney must:
take care of the principal’s property;
avoid any conflicts between the interests of the principal and theirs;
obey the principal’s instructions while they are mentally capable, and any directions made in the enduring power of attorney document;
act within the limits or conditions placed on the powers of the attorney;
keep the finances and property of the attorney and the principal separate;
keep accurate and proper records of their dealings with the principal’s property and finances;
act honestly and in good faith for a proper purpose; and
exercise care pursuant to the duty of care owed to the principal.
An attorney cannot:
make decisions for the principal where the exercise of personal discretion is essential (e.g. the decision to marry or divorce, or to vote);
appoint another person as a substitute attorney for the principal, without having that specific power set out in the enduring power of attorney document;
apply for a passport on the principal’s behalf;
undertake the personal roles of the principal such as trusteeships or company directorships;
give medical or dental consent or make lifestyle decisions on behalf of the principal;
make gifts to third parties, unless expressly authorised by the enduring power of attorney document;
act as a director of a company on behalf of the principal; or
gain a benefit from being an attorney, unless expressly authorised.
If the attorney abuses their position, or breaches a limit or condition placed upon their power, legal action can be taken to protect the interests of the principal.
4. Who may obtain a copy of the enduring power of attorney document?
An attorney does not have an automatic right to obtain a copy of the enduring power of attorney document and can normally only do so if the principal has consented or lost capacity.
5. What happens if I don’t have a power of attorney?
If you lose capacity and you don’t have a power of attorney, then nobody has legal authority to manage your financial affairs. If someone wishes to help manage your financial affairs they will need to make an application to the Guardianship Division of the NSW Civil and Administrative Tribunal to have a financial manager appointed. This can be a lengthy and expensive process.
O’Brien Connors & Kennett would love to help you with this and other legal matters. Give us a call on (02) 9982 1655 or visit our Northern Beaches office located in Dee Why.