Many clients do not recognise the possible benefits (and pitfalls) of Powers Of Attorney.

1 What is a Power of Attorney?
A Power of Attorney is a legal document that enables you to give a trusted person (‘the attorney’), authority to make legal and financial decisions on your behalf. You may authorise your attorney to enter into contracts, sign cheques, dispose of property, appoint an agent, and make certain financial decisions on your behalf.

2 Why do I need a Power of Attorney?
The need for a Power of Attorney can be numerous, ie in the event of an accident, sudden illness, planned or unexpected absence, or when you just need someone to help you manage your financial affairs.
Regardless of whether you are older or younger, in business or not, if you do a lot of travelling or not, there are great benefits in having a power of attorney.

3 When a Power of Attorney is particularly useful?
Circumstances when Power of Attorney is particularly useful may be:

• 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 financial affairs; or
• if you find it burdensome to manage your financial affairs.

4 Does the Attorney need to be a lawyer?
The person appointed as your attorney does not need to be a lawyer, or have any legal qualifications. Anyone of full capacity and age can be your attorney. However, you should choose carefully the person you appoint as your attorney. Because, you are providing your attorney with considerable power, this person should be someone that your trust. Ideally an 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 (being yourself) affairs; and
• be impartial and have no known conflict of interest.

5 Are there different types of Powers of Attorney?
There are two types of Powers of Attorney, a General Power of Attorney, and an Enduring Power of Attorney.
A General Power of Attorney (POA) is:

• only valid while you have legal capacity;
• useful if you are going away for an extended period and you want someone to manage your financial affairs, but do not want the authority to continue after you lose legal capacity; and
• usually drawn up for a specific purpose with specific or general powers.

And an Enduring Power of Attorney (EPA):

• continues to be valid even if you lose mental capacity due to disability or illness; and
• may empower your attorney to make financial, property, lifestyle and health decisions;
• may be activated when required or upon loss of mental capacity; and
• allows your attorney to commence or to continue to manage your affairs after you have become unable to give lawful instructions.

6 Is it better to have more than one attorney?
If the appointed attorney cannot act or continue to act on your behalf, we recommend that you have more than one attorney, or a substitute attorney. Having more than one attorney gives you more flexibility.
Some examples to illustrate why it is helpful include:

• siblings who should act together, or
• you are unsure if one should act on their own, or
• to allow the power to continue if one attorney dies or cannot act. This also applies if you appoint a spouse and a child as an alternate attorney in the event the spouse dying.
  You can also appoint attorneys to act “jointly” or “severally”.

7 Should I pay my attorney?
Paying your attorney is not necessary. For a financial power of attorney, paying your attorney may be considered if the attorney is a professional person.

8 How do I know if the person has sufficient mental capacity to make a power of attorney?
There is no simple formula, but in general an attorney must be able to:

• understand the nature of the power granted;
• the major consequences of decisions related to the power;
• take responsibility for making the choice of being an attorney; and
• make a choice based on the risks and benefits that are important to them.

Remember, different powers require different levels of understanding.
If there is any doubt about capacity, it is best to get in touch with a doctor and ask for a professional opinion.
If this is done, it is 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 not valid.

Depending on the specific jurisdiction, you may revoke/suspend a General Power of Attorney at any time. While you have capacity you may also revoke an Enduring Power of Attorney.

This article is for information purposes only and not intended to be legal advice.

If you need any assistance contact one of our lawyers at info@legallysmart.com.au or call 02 8332 6126 for a no-obligation discussion and expert legal advice.