Most people know what a Will is but many are still puzzled by a Power of Attorney. A Will only applies after you die. A Power of Attorney is a document that operates during your lifetime.
Appointing an Attorney under a Power of Attorney allows someone else to manage your financial affairs on your behalf.
In New South Wales (and in all other Australian jurisdictions), Powers of Attorney are governed by legislation. The imaginatively named Powers of Attorney Act 2003 applies in New South Wales. The legislation sets the rules around how Powers of Attorney are created, what they can be used for and how they can be terminated.
There are many circumstances in which you might consider appointing an Attorney. The two most common situations in which are Power of Attorney is useful are:
- when you are going on an extended holiday and will be out of contact for some time; or
- if you are planning for the future and want to ensure someone can carry on your legal and financial affairs when you are unable to do so.
Extended Holiday
If you are going to be overseas or out of contact for an extended period, you may wish to consider appointing an Attorney who can sign documents in your absence. A Power of Attorney in these circumstances could be limited to specific tasks only or it may be expressed to operate only for a limited time.
Planning for the Future
A more “forward looking” Power of Attorney, one that could be part of an overall estate planning strategy, involves appointing an Attorney who can manage your financial and legal affairs when you are no longer able to do so. A Power of Attorney that is intended to continue past the point in the future where you lose the capacity to manage your own affairs is called an Enduring Power of Attorney.
As an Enduring Power of Attorney is a powerful document, there is a special process for creating one and the document can only be witnessed by certain categories of people including lawyers.
Why Should I Get One?
Of course, there is no obligation or requirement to obtain a Power of Attorney. Think of it like an insurance policy.
If you do not have a Power of Attorney and you were to lose your mental capacity (either through illness, injury, old age or a combination of all three) it may be necessary to apply to the NSW Civil and Administrative Tribunal (formerly the Guardianship Tribunal) to appoint a financial manager.
Such an application would involve cost and uncertainty which can be avoided by planning ahead and choosing someone you trust as your Attorney.
Registration
If your Power of Attorney is going to be used to deal with land titles (eg. selling and leasing real estate) it will need to be registered at Land and Property Information NSW.
Conclusion
A Power of Attorney is a powerful document that can help you plan for the future. The best advice is to give serious consideration to the person (or persons) you appoint to such a trusted position.