Powers of Attorney

Power of Attorney

A power of attorney is a document you can sign to appoint another person (called your attorney) to act for you in relation to financial affairs.  The document states what the attorney is authorised to do. This can be quite narrow and specific, or as general as desired.  Any lawful action taken by the attorney under the power of attorney is binding on you.  It is therefore important to appoint someone you can trust.

When the power of attorney is signed, the document can be given to the attorney or you can hold onto it until the need arises.  When it is provided to your attorney, it can be used to prove that he or she is authorised to act on your behalf.  Even though you have appointed an attorney, you can still personally carry out any transactions, such as banking and the sale of property, while you retain the ability to do so.  

You may appoint more than one person as your attorney.  You can appoint them jointly (in which case both or all attorneys must agree and sign) or jointly and severally (the attorneys can act together or separately).

Duration of the Power of Attorney

A power of attorney is in effect as long as you want it, and can be cancelled at any time while you have the capacity to do so.  It may also be set for a particular period of time, for example a period while you are ill or while you are overseas.

By law, a power of attorney ceases to operate if you lose the ability to make decisions or when you die.

Enduring Power of Attorney

If you want the power of attorney to continue, even if you lose the capacity to make your own decisions, you need to sign an enduring power of attorney. 
An enduring power of attorney differs from a power of attorney in that:

• The intention for the enduring power of attorney to continue is stated in the document; 
• Your signature on the document is appropriately witnessed; and 
•  A certificate is attached to the document declaring that the witness explained the effect of the document to you before you signed and that you appeared to understand it. 

An appropriate witness, in this case, is: 

•  A solicitor, barrister or a Registrar of the Local Court; or
• A licensed conveyancer, employee of the Public Trustee, or of a trustee company, who has completed an approved course of study. 

The witness cannot be the person you propose to act as your 'enduring attorney'.

Why have an Enduring Power of Attorney?

Making an enduring power of attorney is a way for you to legally appoint a person of your choosing to manage your financial affairs even if you later lose the capacity to make these decisions for yourself.

When can an Enduring Power of Attorney be given? 

An enduring power of attorney must be made when you are of sound mind. It is too late to make this appointment after you have lost the capacity to manage your own affairs.  If there is a doubt, you should seek a medical opinion.

You can make enduring power of attorney arrangements, which come into effect immediately, or one that remains 'dormant' and only comes into effect in particular circumstances.  For example, you could decide to complete an enduring power of attorney that becomes active only when you are unable to manage financial matters for yourself.

It is usual to give your enduring attorney power to deal with all your assets, as you cannot predict exactly how your needs should be met after you have lost your capacity. This means it is very important for you to choose the right person to be your attorney.

Who can I appoint as my attorney?

The person you appoint should be someone you trust.  He or she must be 18 years or over.

If you have no one like this or they are too busy or do not have the required skills, the Public Trustee NSW or private trustee companies can be appointed as your attorney. They will charge a fee for handling your affairs.

Attorney's authority to use your money or give gifts

An attorney cannot give away your money or property unless the power of attorney form specifically allows the attorney to do so. The attorney may be authorised to give give reasonable gifts.  Allowable gifts are gifts to your relatives or close friends of a seasonal nature (eg. birthday, Christmas or other religious holiday) or because of a special event (eg. birth or marriage). Also permitted are donations of a kind that you used to make or might reasonably be expected to have made (eg. to a favourite charity). However, the value of the gift or donation must be reasonable, having regard to your financial circumstances.

If you want your attorney to have a wider power to give gifts, you need to specifically authorise that in the power of attorney. 

Attorney's authority to use your money for the attorney's benefit or the benefit of others

As with gifts, an attorney cannot use your money for his or her own benefit, or the benefit of any other person, unless the power of attorney form specifically allows the attorney to do so. If you do authorise the use of your assets to benefit another person, then the amount of the benefit must be reasonable, having regard to your financial circumstances.

Registering your Enduring Power of Attorney 

If you want your attorney to be able to sell or deal with real estate on your behalf or manage your bank accounts, the power of attorney must be registered with the Department of Lands, Lands and Property Information Division.

Safeguards with Powers of Attorney

In addition to the limitations on the powers of an attorney under an enduring power of attorney set out in 1.8 and 1.9, there are a number of safeguards in place about enduring powers of attorney.  The Guardianship Division of the NSW Civil & Administrative Tribunal and the Supreme Court may review the making, operation and effect of an enduring power of attorney at the request of an "interested person".  "Interested persons" are an attorney under any current power of attorney made by the principal, any guardian of the principal, an enduring guardian of the principal or any other person who, in the opinion of the Guardianship Division (or Supreme Court), has a proper interest in the proceedings or a genuine concern for the welfare of the principal. 

If an application is made, the Guardianship Division (or the Supreme Court) may, after conducting a hearing, make a declaration that the person who made the enduring power of attorney under review (the principal), was incapable of making a valid power of attorney and that the enduring power of attorney was invalid for that reason or for any other reason.

If the Guardianship Division reviews the operation and effect of an enduring power of attorney and is satisfied that it is in the best interests of the principal, or that it would better reflect their interests, the Guardianship Division may do a number of things, including:  

1. Reviving the enduring power of attorney and appointing a new attorney; 

2. Removing or replacing an attorney; 

3. Varying a term of an enduring power of attorney; and 

4. Requiring attorneys to furnish records and accounts for auditing.

The Guardianship Division (and the Supreme Court) may also make a declaration that the principal lacks capacity for the time being.  The effect of this declaration is that only the attorney, and not the principal, may manage the principal's financial affairs.  

An attorney under an enduring power of attorney may apply to the Guardianship Division (or the Supreme Court) for advice or direction relating to the scope of the attorney's appointment or the exercise of any function under the enduring power of attorney.

In addition, the Guardianship Division (and the Supreme Court) retains its jurisdiction to make a financial management order in relation to a principal's estate, provided that the Guardianship Division is satisfied that the principal is not capable of managing his or her financial affairs, that there is a need for another person to manage those affairs and that it is in the principal's best interests that the financial management order be made. The effect of such a financial management order is to suspend any power of attorney the principal has made for the time the financial management order is in force.  

The Guardianship Division may treat an application for review of an enduring power of attorney as an application for a financial management order and may proceed to make a financial management order if the tests for doing so, set out above, are met.  The Guardianship Division may appoint either a private person as manager of the principal's estate (subject to the supervision of the NSW Trustee & Guardian) or the NSW Trustee & Guardian.

In situations where there is no other person suitable or able to assist, the NSW Trustee & Guardian can be legally appointed to protect and administer the financial affairs and property of people unable to make financial decisions for themselves.  

For more information contact Katelin Turner 9018 6414 kturner@rbhm.com.au