A Power of Attorney is a document which allows you to appoint a person (the Attorney) to make legal and financial decisions on your behalf. The predominant reason you might appoint an Attorney is to prepare for the possibility of becoming incapable of making such decisions for yourself. You will still maintain control over your financial affairs while you have capacity. You can also revoke the Power of Attorney at any time, provided you have capacity to understand the implications of this decision.
There are two types of Power of Attorney:
- General Power of Attorney – A General Power of Attorney is suitable for temporary periods, such as if you are travelling, ill or have an accident. It becomes invalid upon your death or when you lose the mental capacity to make your own decisions.
- Enduring Power of Attorney – An Enduring Power of Attorney is appropriate when preparing for the possibility of future long-term or permanent incapacitation due to mental or physical illness. It continues to have effect if you lose the mental capacity to make your own decisions.
Choosing someone to make legal and financial decisions for you, particularly at a time when you may lack capacity to understand your affairs, is a big decision. Here are our top tips for making a suitable Power of Attorney:
1. Choose someone you trust
Your Attorney will have some powerful and important responsibilities in managing your legal and financial affairs for you. It is important that you nominate someone who you are confident will act honestly, diligently and in your best interests if they are appointed. You are able to nominate two or more people to act together if you consider it would be better to have a check and balance in place, and you can also appoint three or more people subject to a simple majority (ie a two versus one scenario).
2. Choose someone competent
Your Attorney may be required to manage your financial and legal affairs for a prolonged period of time, and your affairs may be more complex than the Attorney’s themselves. It is therefore imperative that you nominate someone competent to deal with your affairs, who you are confident will complete their duties with reasonable skill and care and keep proper records and accounts.
3. Carefully consider what powers to give
You are able to appoint your Attorney to deal with all of your financial or legal matters, or you can appoint them to deal with specific matters/items only. It may be that you appoint one person to manage general financial affairs, such as your day-to-day living expenses, and someone else to manage complex legal and financial affairs, such as the running of a business.
4. Carefully consider what limitations you may impose
You can also limit your Attorney’s ability to deal with certain matters. This might be by generally allowing them to act as your Attorney, but preventing them from dealing with one particular asset. It could also be that you appoint them to deal with all assets, but specifically prevent them from selling property ie only allow them to continue to manage it and rent it out.
5. Carefully consider when the power will commence
You can nominate that your Attorney’s powers commence immediately, when you cease to have capacity to make decisions yourself, or upon some other time, circumstance or occasion, such as only during times that you are out of the country.
6. Revoke or vary your Power of Attorney if necessary
If after making a Power of Attorney you consider that someone you have appointed is no longer appropriate, or if your Attorney would no longer be able to act because they have lost capacity themselves, then it is important that you update your appointment as soon as possible.