Many people have heard of a Power of Attorney, but they do not always understand the authority it provides, the benefits it offers, or the different types of Powers of Attorney available in New South Wales.
A Power of Attorney is an important legal document that allows another person to manage certain financial and legal matters on your behalf. It can be useful if you travel overseas, take an extended holiday, experience illness, suffer an accident, or reach a stage in life where you need assistance managing your affairs.
In this article, our estate planning lawyers explain why appointing a Power of Attorney is an important part of planning for the future. We also explain the difference between a General Power of Attorney and an Enduring Power of Attorney in NSW.
You can also find further information about Powers of Attorney through the NSW Government and the NSW Civil and Administrative Tribunal (NCAT).
Selecting a person to act on your behalf
A Power of Attorney allows you to appoint another person, known as your Attorney, to act on your behalf and complete tasks that you would normally handle yourself.
Your Attorney may be able to:
- sign documents on your behalf;
- manage banking and financial transactions;
- pay bills and expenses;
- manage property and other assets; and
- enter into agreements in your name.
Because a Power of Attorney gives another person significant authority, choosing the right person is extremely important. Your Attorney does not need to be a lawyer, but they should be someone you trust and who understands your wishes.
Many people appoint a spouse, family member or another trusted person. However, the person you choose must be over 18 years old and capable of acting responsibly in this role.
The difference between a General and Enduring Power of Attorney
Not all Powers of Attorney provide the same level of protection. In NSW, the two main types are a General Power of Attorney and an Enduring Power of Attorney.
General Power of Attorney
A General Power of Attorney allows your Attorney to make financial and legal decisions on your behalf.
However, this authority only continues while you maintain the mental capacity to make your own decisions. If you lose capacity, the General Power of Attorney automatically ends.
A General Power of Attorney is often used as a practical arrangement. For example, someone travelling overseas may appoint an Attorney to manage their Australian financial and legal affairs while they are away.
Enduring Power of Attorney
An Enduring Power of Attorney works in a similar way to a General Power of Attorney, but the authority continues even if you lose the ability to make decisions in the future.
This makes an Enduring Power of Attorney an important document for future planning. It allows someone you trust to manage your financial affairs if illness, injury or another circumstance affects your decision-making ability.
In NSW, an Enduring Guardian appointment can be prepared alongside an Enduring Power of Attorney. An Enduring Guardian can make personal and health decisions on your behalf if you lose capacity.
More information about Enduring Guardianship is available through the NSW Civil and Administrative Tribunal.
Unlike a General Power of Attorney, an Enduring Power of Attorney must be explained and witnessed by an authorised person, such as a lawyer, before it becomes valid.
It is also important to understand that an Enduring Power of Attorney ends when you die. After death, your Will and the estate administration process determine how your assets are dealt with.
What happens if you lose capacity without a Power of Attorney?
Many people do not consider the possibility that they may lose capacity and become unable to manage their own financial affairs. However, if this happens without an Enduring Power of Attorney in place, you cannot simply prepare one later because you may no longer have the legal capacity to sign the document.
A common misconception is that a spouse or family member automatically has the right to manage your finances if you lose capacity. This is not the case in NSW.
Without an Enduring Power of Attorney, your family may face difficulties managing important financial matters, including:
- bank accounts;
- jointly owned property;
- shares and investments;
- financial commitments; and
- other assets or liabilities.
In these circumstances, someone may need to apply to the NSW Civil and Administrative Tribunal for a financial management order.
A financial management application is usually made by a family member or another person who believes they can manage your financial affairs. However, NCAT must decide whether the proposed financial manager is suitable and whether the appointment is in your best interests.
If NCAT does not appoint a private financial manager, it may appoint the NSW Trustee and Guardian to manage your financial affairs.
Having a financial manager appointed by a tribunal can create additional stress, delays and costs for families. Preparing an Enduring Power of Attorney while you still have capacity allows you to choose the person you trust to manage your affairs.
When does an Attorney’s power begin?
When preparing a Power of Attorney, you can decide when your Attorney’s authority begins.
You may choose for your Attorney to have authority immediately, or you may specify that the authority begins at a later date or when a particular event occurs.
If you do not nominate a specific start date or event, the Attorney’s authority generally begins once the document becomes effective.
Even if your Attorney has authority to act immediately, you can continue making your own financial decisions while you still have the capacity to do so.
Creating a Power of Attorney does not remove your ability to manage your own affairs. Instead, it provides a trusted person with the authority to assist when necessary.
Why is a Power of Attorney important for future planning?
A Power of Attorney is an important part of a comprehensive estate plan. While a Will explains how your assets should be distributed after your death, a Power of Attorney helps manage your affairs during your lifetime if you cannot do so yourself.
Preparing these documents in advance gives you greater control over your future decisions. It also helps reduce uncertainty for your family during difficult circumstances.
Without a valid Power of Attorney, your loved ones may need to apply for authority through NCAT before they can manage your financial affairs.
Frequently asked questions about Powers of Attorney in NSW
What does a Power of Attorney allow someone to do?
A Power of Attorney allows an appointed person to make financial and legal decisions on your behalf, depending on the authority granted in the document.
This may include managing bank accounts, signing documents, dealing with property matters and handling other financial responsibilities.
What is the difference between a Power of Attorney and an Enduring Power of Attorney?
A General Power of Attorney only operates while you maintain mental capacity. An Enduring Power of Attorney continues even if you lose capacity and can no longer make financial decisions yourself.
Can my Attorney make medical decisions for me?
A Power of Attorney generally only covers financial and legal decisions. In NSW, personal and health decisions are usually managed through an Enduring Guardian appointment.
Who should I appoint as my Attorney?
You should choose someone you trust who understands your wishes and will act in your best interests. This person may be a spouse, family member, friend or another trusted individual.
Can I prepare a Power of Attorney after losing capacity?
No. A person must generally have the required mental capacity when signing a Power of Attorney. If you have already lost capacity, an application to NCAT may be required.
Does a Power of Attorney continue after death?
No. A Power of Attorney ends when the person who created it dies. After death, the executor named in the Will manages the estate administration process.
Protecting your future with a Power of Attorney
A Power of Attorney is not only useful for older people or those experiencing health issues. It is a practical planning tool that allows you to prepare for unexpected situations and choose who can assist with your affairs if needed.
By preparing an Enduring Power of Attorney while you still have capacity, you can decide who you trust to manage your financial matters in the future.
Without this document, your family may need to go through a tribunal process to obtain authority to manage your affairs.
Our experienced estate planning lawyers can help you prepare a Power of Attorney that reflects your circumstances and future needs.
This article provides general information only and does not constitute legal advice. You should obtain advice about your specific circumstances before taking action.
If you would like assistance preparing a Power of Attorney in NSW, contact us on (02) 9818 2888 or email [email protected].