Pro­tect­ing your tomor­row, today: The impor­tance of an endur­ing pow­er of attorney

We often talk about the impor­tance of draft­ing your estate plan­ning doc­u­ments, includ­ing how draft­ing your will can ensure your loved ones are pro­vid­ed for as you wish, and the risk of dying intes­tate, giv­ing the State author­i­ty to decide how your estate is admin­is­tered, is avoid­ed fol­low­ing your death. But what about when you’re still alive, yet are unable to make deci­sions regard­ing your finan­cial and legal affairs?

That’s where your pow­er of attor­ney steps in.

What is a pow­er of attorney?

To put it plain and sim­ple, a pow­er of attor­ney is a legal doc­u­ment which appoints an indi­vid­ual, usu­al­ly a fam­i­ly mem­ber, close friend or an inde­pen­dent per­son (e.g. lawyer or accoun­tant), who is autho­rised to man­age your legal and finan­cial affairs on your behalf. This can include buy­ing and sell­ing real estate, shares or oth­er assets, oper­at­ing your bank account, or spend­ing mon­ey on your behalf.

There are two types of pow­er of attor­neys, gen­er­al and enduring.

1. Gen­er­al pow­er of attorney

   A legal doc­u­ment that gives an indi­vid­ual the author­i­ty to act on your behalf regard­ing your finan­cial and legal affairs while you still have men­tal capac­i­ty. The doc­u­ment comes into oper­a­tion at accep­tance of the appoint­ment and becomes invalid once you either die or lose men­tal capacity.

2. Endur­ing pow­er of attorney

   A legal doc­u­ment that gives an indi­vid­ual the author­i­ty to act on your behalf regard­ing your finan­cial and legal affairs and extends after you have lost men­tal capac­i­ty. The doc­u­ment comes into oper­a­tion either at accep­tance or once you have lost men­tal capac­i­ty and becomes invalid once you die.

You are able to set what­ev­er con­di­tions or lim­i­ta­tions on your attor­ney which con­trols what they are and are not autho­rised to do on your behalf. The attor­ney must always act in your best inter­ests, so ensur­ing that you appoint a per­son that you trust is crucial.

A com­pa­ny is also able to appoint a com­pa­ny pow­er of attor­ney which autho­ris­es an indi­vid­ual to act on behalf of the com­pa­ny, par­tic­u­lar­ly where the director/​s are not capa­ble of doing so. It is impor­tant to note how­ev­er that it does not give the attor­ney author­i­ty to act as a direc­tor of the company.

What hap­pens if I lose capac­i­ty and don’t have an endur­ing pow­er of attorney?

If you have not appoint­ed an endur­ing pow­er of attor­ney and you lose capac­i­ty, your next of kin can apply to the Guardian­ship Divi­sion of the NSW Civ­il and Admin­is­tra­tive Tri­bunal who may appoint, if they find it to be in your best inter­ests, a finan­cial man­ag­er to man­age your finan­cial and legal affairs under a finan­cial man­age­ment order. This lim­its the con­trol that your loved ones have over access to your finances. We have seen that obtain­ing approval from the finan­cial man­ag­er to utilise funds is often less stream­lined, espe­cial­ly in cir­cum­stances where access to funds is urgent.

We see too often that the thought of draft­ing one’s estate plan­ning doc­u­ments comes lat­er on in life, where los­ing one’s men­tal capac­i­ty or death is seen as a greater risk. How­ev­er, we have said it before and will say it again, life is unpre­dictable. Any­thing can hap­pen at any time to change your cir­cum­stances in an instant, no mat­ter how old you are. To ensure that your affairs are in order and your loved ones are pro­vid­ed for, it is imper­a­tive to think about draft­ing your estate plan­ning soon­er rather than lat­ter, to pro­tect your tomor­row, today.