Many people often overlook the need for making a power of attorney, believing it can wait until they become unwell or reach “a certain age”. However, circumstances can change unexpectedly and so a power of attorney should be made as part of your estate planning documentation (no matter your age or health condition) to ensure someone can manage your affairs when you are unable to.

What is a power of attorney?

A power of attorney authorises a person to do anything in your name that you can legally do. For example, an attorney can commence or defend legal proceedings in your name, buy property in your name or sell property that you own. However (subject to the terms of the power of attorney) the attorney must only use the power for your benefit and must act in your best interests.

You can choose for a power of attorney to be effective even if you have capacity to make those kinds of decisions for yourself.

A power of attorney appointment ceases on the death of the appointor.

A power of attorney document can be misused therefore it is extremely important that you trust the attorney.

Power given to attorney may be limited

The power of attorney document may be drafted to limit the power you are giving to the attorney, for example, to allow the attorney to only access certain bank accounts.

Enduring power vs general power of attorney

An enduring power of attorney will continue to operate should you become mentally or physically incapable of managing your affairs.

A general power of attorney will cease if you lose mental capacity and is usually given for a specific purpose, eg signing a contract and all other required documents for a property purchase.

Provision for gifts, donations or benefits to others

An attorney cannot give donations, gifts to family members (for example for their birthday) or benefits to any other person to meet medical or living expenses out of your assets without an express provision in the power of attorney document allowing this.

The attorney also cannot confer benefits on themselves without an express provision in the power of attorney document allowing this.

When the document takes effect

The power of attorney can be drafted so that it takes effect and can be used immediately once the attorneys have accepted their appointments. Alternatively, the document may provide the power of attorney can only be used once a medical practitioner considers you are unable to manage your affairs and provides a certificate to this effect or so that the power of attorney document takes effect once your attorney considers you need assistance in managing your affairs.

Can I change the power of attorney at a later date?

If you have mental capacity, you can revoke your power of attorney and make a new appointment.

What happens if I don’t have a power of attorney document?

If you have not appointed an attorney and you are unable to manage your affairs, your next of kin (or close friend) may apply to the Guardianship Division of NCAT (NSW Civil and Administrative Tribunal) which may appoint a financial manager for you. The NSW Trustee and Guardian will be notified of the application and may be appointed your financial manager if the Tribunal considers it to be in your best interests, rather than appointing the applicant. This process can also be stressful and can take time.

It is therefore very important that you consider making a power of attorney and you carefully consider who you will appoint as attorney.

If you would like to make a power of attorney appointment or discuss further, please contact us on 8251 7777.

This publication is produced by Pigott Stinson. It is intended to provide general information only. The contents of this publication do not constitute legal advice and should not be relied upon as legal advice. Formal legal advice should be sought from us in respect of the matters set out in this publication. Liability limited by a scheme approved under Professional Standards Legislation.