Having an up-to-date will is an important consideration to safeguard the distribution of your estate according to your wishes if you pass away.
But if you were sick or injured, or for any other reason not able to manage your financial and legal affairs yourself, you need to know that there is someone you trust who could help you.
By nominating someone as your power of attorney, you give them the authority to manage your affairs on your behalf.
This can include spending and managing your money, buying and selling shares or property and taking care of business transactions. Powers of attorney must be registered if they relate to land dealings.
Some powers of attorney also deal with medical and guardianship issues. This will depend on the state or territory you live in, so check with your legal representative or your local Public Trustee. In some states, you may need a separate power of guardianship to deal with these issues.
When it comes to financial issues, there are two main types of power of attorney:
- A general power of attorney. These are useful for one-off transactions such as business or property dealings while you are overseas. You can make it ahead of time and specify when you want it to start and end. A general power of attorney ceases if you lose the capacity to make legal and financial decisions yourself.
- An enduring power of attorney. This is effective if you lose the capacity to make legal and financial decisions. For example, if you were to develop dementia, your ‘attorney’ could step in and handle your financial affairs for you. This includes buying and selling investments as well as operating bank accounts.
Do I need a power of attorney?
Mobile phones, email and the internet have created increasingly less need for general powers of attorney.
In some instances, it might also be acceptable for signed documents to be scanned and emailed.
However, this is not always the case. Sometimes, the original documents have to be signed and presented, so you should check first if you think you might be unavailable in person. Your power of attorney would have your authority to act on your behalf.
The need for enduring powers of attorney remains important to ensure that in the event you can no longer make legal and financial decisions yourself, someone you choose and trust has the power to do so on your behalf.
Simple finances still need consideration
Even simple everyday money management can be affected if you or your partner become incapacitated.
Knowing that a possibly difficult or traumatic life experience could be eased with the help of someone else that you know and trust could bring some assistance and peace of mind for you and your loved ones.
If you don’t have a power of attorney set up and something happens that requires legal and financial affairs to be managed, it could be taken under the control of the state guardianship board.
The management of even very simple transactions, including any accident compensation for example, would be handled outside of your control and could end up costing you or other members of your family time, money and unnecessary stress.
The rules are different in each state and territory of Australia. You can see the most up-to-date information on the Australian Government website.
Who should you appoint?
It goes without saying that the person you nominate as your attorney must be capable, willing and trustworthy.
The discussion about powers of attorney often takes place when people are drawing up a will, with the person named as executor of the will also being given enduring power of attorney.
Couples can choose to appoint each other, a family friend or their adult children. Alternatively, you could nominate your legal representative or the Public Trustee.
It is essential that you talk to the person you want to nominate and check they have the time and feel comfortable with the responsibility.
If they decline when the powers are activated, the job may go to the guardianship board.
You can also consider nominating a second attorney in case your first choice is unable or unwilling to accept responsibility when the time comes.
However, nominating multiple attorneys in an attempt to avoid family conflict might actually end up creating potential difficulties, so you should think carefully about your choices and the outcome you are hoping for.
Choosing an attorney is not about who your money will go to, but who can and will manage money for you.
If you need help
You can talk to your financial adviser about your personal, family and financial circumstances to help work out the best outcome if in future, for whatever reason, you are not able to handle your own affairs.
You would need to talk to your lawyer to draw up the appropriate power of attorney.
No matter how simple or complex your finances are, having a power of attorney in place can be every bit as important as having an up-to-date will.