Six questions to ask when appointing a power of attorney
Before we get started with the top 6 questions we are asked about Powers of Attorneys, we need to address the most important question of them all:
What is a Power of Attorney?
A Power of Attorney is a legal document that gives a trusted person, the legal authority to act for you, and to make legally binding decisions on your behalf. These financial decisions (ie should you sell your house to release capital) or medical decisions (ie should you have a particular surgery).
If you do not have a Power of Attorney and you do not have the ability or capacity to make some of these decisions then you could be left in a position of uncertainty or difficulty.
Below are 6 top questions we are asked about by clients when dealing with Powers of Attorney.
1. When is a Power of Attorney useful?
- to relieve yourself of the day to day demands of financial paperwork and record keeping;
- as a safety net when travelling or to allow someone to handle your affairs in your absence;
- to avoid burdening family or friends with the responsibility of looking after your affairs; or
- to make arrangements for the management your prosperity or financial affairs.
2. Does my Attorney need to be a lawyer?
The person appointed does not need to have legal qualifications – you can appoint anyone.
However, we recommend that the person appointed should be chosen carefully and with some thought as you are providing them with considerable power.
An ideal attorney should:
- have integrity;
- be willing to act in that capacity;
- have competence in areas of relevance;
- be able to act in a business-like manner;
- be able to spare the time necessary for the task;
- live in the locality in which they are to act;
- be agreeable to respecting the confidentiality of the donor’s affairs; and
- be impartial and have no known conflict of interest.
3. Are there different types of Powers of Attorney?
Yes, in Victoria there are general powers of attorney, specific powers of attorney and enduring powers of attorney.
A General Power of Attorney is:
- only valid while you have legal capacity;
- useful if you are going away for an extended period and you do not want the authority to continue should you lose legal capacity; and
- usually drawn up for a specific purpose with specific or general powers.
An Enduring Power of Attorney (EPA):
- continues to be valid even if you lose legal capacity due to disability or illness;
- may empower your attorney to make financial, property, lifestyle and health decisions;
- may be activated when required or upon loss of legal capacity; and
- allows your attorney to commence or to continue to manage your affairs even though you have become unable to give lawful instructions.
4. Is it better to have more than one attorney?
We recommend that you do have more than one Attorney as it gives you more flexibility.
Some examples to illustrate why it is helpful to have more than one attorney include:
- Appointing multiple children or siblings to act together;
- If you are unsure if one attorney should act on their own;
- Allowing the power to continue if one attorney dies or cannot act;
- Appointing a spouse and also appointing a child as an alternative attorney in the event that your spouse dies or loses capacity to act.
You can also appoint attorneys to act “jointly” (acting together) or “severally” (they can act independently if required).
5. Should I pay my attorney?
Paying your attorney is not necessary to give legal affect to the power, and for a financial power would normally only be considered if the attorney(s) is a professional.
6. How do I know if the person appointing me as an Attorney has sufficient mental capacity to make a Power of Attorney?
There is no simple formula, but in general terms they must be able to:
- understand the major consequences of a decision;
- take responsibility for making that choice; and
- make a choice based on the risks and benefits that are important to them.
If there is any doubt about capacity, it’s best to get in touch with a doctor and ask for a written opinion. If this is done it may be wise to have the Power of Attorney signed on the same day as you get the medical report so there can be no subsequent claim that the appointment was invalid.
Many clients do not recognise the possible benefits (and pitfalls) of making a Power of Attorney.
The benefits of having a Power of Attorney can be numerous. In case of accident, sudden illness, planned or unexpected absence, or when you just can’t cope, you may need someone to manage your financial affairs.
A common misconception is that Powers of Attorney are for older people. This is simply not correct! It doesn’t matter if you are old or young, in business or not, if you do a lot of travelling or not, there are great benefits in having a Power of Attorney.