Enduring Powers of Attorney

Overview

It is often necessary to give to someone else the legal authority to act for you in certain circumstances. This can be done using a power of attorney, a legal document that appoints one person (the attorney) to act on behalf of another (the principal or donor) in relation to their property and financial affairs.

It is now a common part of estate planning that, besides making a Will, a person also appoints an Enduring Power of Attorney to make sure that should they become incapacitated their affairs can still be managed without the need for the intervention of the courts or government agencies.

For this type of Power of Attorney to be created, the person granting the Power of Attorney must invoke the authority (in NSW) of Section 19 of the Power of Attorney Act 2003 and have a certificate attached to the Power of Attorney signed by a prescribed person, usually the solicitor who prepares the document, to the effect that the principal understands that the Power of Attorney will operate even when the principal loses legal capacity.

The absence of such a statutory certificate would mean that the Power of Attorney would cease to operate even when the principal loses legal capacity.

The absence of such a statutory certificate would mean that the Power of Attorney would cease to operate once the principal loses legal capacity.

In many ways, creating an Enduring Power of Attorney is like insurance against the possibility that, during your lifetime, you may lose the capacity to manage your own affairs and thus avoid putting at risk your own and your family’s financial position.

Note that if an Attorney will be signing documents that affect real estate, the Power of Attorney must be registered at Land and Property Information NSW.

However, even granting an Enduring Power of Attorney does not mean the transfer of decision-making power in respect to your personal lifestyle/welfare or medical treatment. In NSW, this must be done by a separate legal instrument appointing an Enduring Guardian prepared under the Guardianship Act. Information on Enduring Guardians can be found in a separate brochure.

Summary of changes introduced by the Power of Attorney Act 2003

These changes follow complaints about abuses of the powers granted to some attorneys under the old form of Power of Attorney. A review of the legislation by the NSW Government resulted in the Parliament enacting the Power of Attorney Act 2003.

The Act sets new requirements in respect to the granting of Powers of Attorney and imposes some new limits on attorneys receiving such powers.

Key changes are:

  • A Power of Attorney will not operate until it is endorsed by a written acceptance by the person granted the powers.
  • Greater freedom is granted to the principal to indicate when they wish the Power of Attorney to operate from.
  • The new prescribed form contains a statement of important information for both principals and attorneys emphasising the significance and scope of the powers conveyed to the attorney.
  • The new prescribed form contains more information and more choices to enable people to make better-informed decisions about what they want to authorise their attorney to do.
  • A prescribed Power of Attorney does not authorise an attorney to give a gift of all or any of the principal’s property to any other person unless expressly authorised. However, S.11(2) allows the giving to family and friends of traditional gifts for occasions such as Christmas, birthdays and marriages.
  • Specific authorisation can also be given to an attorney to use funds of the principal to give benefits to the attorney or dependant children for reasonable living (including housing, education transportation) and medical expenses (S.12(2) and S.13(2)). This means that a person who is an attorney for their spouse can use the spouse’s money to pay for such expenses.
  • The Act provides relief where an attorney sells assets which are the subject of a specific gift in a principal’s Will. Under the new Act the beneficiary is entitled to the funds or other property arising from the sale.
  • An attorney must now keep reasonable accounts and records about the principal’s money and property and always act in the best interests of the principal.
  • A wider group can now witness Enduring Powers of Attorney – also included are licensed conveyancers and qualified Public Trustee and trustee company employees.
  • Enduring Powers of Attorney made prior to 16 February 2004 are still valid and will continue to operate under the prior legislation which is kept on the Statute books purely for that purpose.
  • Where more than one attorney is appointed and one dies, provided they were appointed “severally” or “jointly and severally”, under the new Act the death of one does not terminate the Power of Attorney.

Understanding the ramifications of appointing an Enduring Power of Attorney

Needless to say, taking the step of appointing an Enduring Power of Attorney should not be taken lightly.

It is important that you discuss all relevant issues - including the following - with your legal adviser when considering appointing a Power of Attorney:

  • The choice of the person or persons to be appointed your Power of Attorney - one or more can be appointed, also reserve Attorneys.
  • What conditions or limits should be placed on the grant of Power of Attorney and in what circumstances should the Attorney be free to make decisions?
  • The circumstances in which a Power of Attorney would become ineffective eg your appointee declines the responsibility.
  • When and how a grant of Power of Attorney can be cancelled or revoked.
  • What risks are there in granting a Power of Attorney?
  • How do you get third parties to accept a Power of Attorney?

Call Terry Purcell or Dawn Wong at RetireLaw on 02 9970 0800 if you have any questions or to arrange a consultation or send us an email.

Back to Resources.

LEAP Website | Powered by LEAP Legal Software