What are Enduring Powers of Attorney and do I need them?

7 August, 2022 | Kimberley Brown

Few people realise the importance of setting up Enduring Powers of Attorney.  Enduring Powers of Attorney are essential for older people, however we recommend that people of all ages consider putting these valuable documents in place.  After all, an accidents and unexpected illnesses can occur at any time, and often happen when we least expect them.

What is an enduring power of attorney?

An Enduring Power of Attorney (“EPOA”) is a legal document whereby a person (the “donor”) appoints an agent (the “attorney”) and authorises them to do certain things on the donor’s behalf.

There are two kinds of enduring power of attorney:

1. property; and
2. personal care and welfare.

Having EPOAs in place gives you the peace of mind that the person or persons that you want to be managing your affairs if or when you lose capacity can do so without lengthy delays or court involvement.   In the long run, these documents save you and your family a lot of money and ultimately a lot of unnecessary stress.

When should I have an Enduring Power of Attorney document prepared?

EPOAs are not just for the elderly.  Over the years, we have acted for numerous clients in applying to the Court to be appointed welfare guardians or property managers for their young spouses, children and other relatives who have been in accidents or suddenly diagnosed with neurological disorders.  People tend to think those things will never happen to them, or to their loved ones… but the truth is they can happen to anyone at any time.

It is essential that Enduring Powers of Attorney (“EPOAs”) are set up before they are needed.  Once a person has been declared mentally incapable, their family will only be able to act on their behalf if EPOAs are in place.  If there are no EPOAs, the only option available to their family is to apply to the Court for an order to act on the person’s behalf under the Protection of Personal & Property Rights Act.  This is an expensive and time-consuming process and can ultimately result in a non-family member being appointed.

At Smith and Partners, we encourage all of our clients to have EPOAs prepared at the same time as they have Wills prepared.  In fact, we think EPOAs are such an important aspect of Estate Planning that we offer these documents at a reduced price when they are prepared together with a Will.

When does an Enduring Power of Attorney come into effect? When can they be used?

EPOAs in relation to personal care and welfare can only be used when the donor has been declared “mentally incapable” – for example, if you enter the late stages of a neurological disorder such as dementia or Alzheimer’s, or if you suffer from a brain injury or coma.  At this point, the EPOA will need to be activated or invoked.

EPOAs in relation to property can either come into effect immediately once they are signed or only once the donor is declared mentally incapable, at which point they will need to be activated or invoked. The donor elects at what point the power of attorney is to come into effect at the time the EPOA is drafted.

They are called “enduring” powers of attorney because the power granted by them endures through the donor’s mental incapacity. A common misconception is that they remain in effect after the donor’s death; this is not the case. When the donor dies, the EPOA is immediately revoked and the terms of the donor’s Will take effect.

You can read more about how to activate or invoke an EPOA by clicking here.

Why do I need an enduring power of attorney for property?

An EPOA in relation to property enables the attorney to deal with the donor’s personal property, including their bank accounts, investments, and any share or interest they have in real estate.  This type of document can prove to be extremely valuable when a person is not capable of managing their own property or financial affairs.

Example:

Jane and Bob are married and own a house in their personal names, jointly.  Bob has been declared mentally incapable and has been placed in a rest home.  Jane wants to sell the house and buy a small one-bedroom unit for herself and then use the equity to pay for Bob’s rest home fees.  Even though Jane and Bob are married, and she wants to act in the best interest of both herself and Bob, she will not be able to sell the property UNLESS Bob has EPOAs in place.  This is because Bob no longer has the required mental capacity to sign a sale and purchase agreement.

Jane’s only option would be to apply to the Court to be appointed as Bob’s Property Manager.  This is often a time consuming and stressful process, generally taking months and costing thousands of dollars in legal fees. If Bob had put a property EPOA in place appointing Jane while he still had mental capacity, Jane would be able to sign a sale and purchase agreement on his behalf once the EPOA had been activated.  This would avoid any delays in selling their property, and would give Jane a clear path forward.

What if I don’t want the power of attorney to continue after I have lost capacity?

If you would like to give somebody a non-enduring power to act in relation to your financial affairs for a limited time, then a general (non-enduring) Power of Attorney and Deed of Delegation may be more appropriate.  This type of appointment can be very helpful if you are likely to be physically absent when a document (such as a sale and purchase agreement or loan document) needs to be signed.  Unlike the Enduring Power of Attorney, this power of appointment ends either at the end of the specified time frame or matter, or upon loss of mental capacity, as well as upon death.

Why do I need an enduring power of attorney for personal care and welfare?

Gone are the days when a person’s ‘next of kin’ can make decisions about their loved one’s personal care and welfare matters.  Hospitals as well as the vast majority of rest homes now require a copy of a patient’s EPOA before any person can make decision on the donor’s behalf.  Having an EPOA in place with respect to personal care and welfare allows your loved ones to make decisions on your behalf without any lengthy delays.

Example:

Jane now wants to move Bob from Rest Home A to Rest Home B because she feels that he is not getting adequate care at Rest Home A.

Bob does not have the mental capacity to make this decision for himself. If Jane has not been appointed as Bob’s attorney in an EPOA, she cannot make this decision for him.  Again, Jane’s only option is to apply to the Court to be appointed as Bob’s ‘Welfare Guardian’, costing thousands of dollars, and often causing long delays.

Ensure that you and your family are protected by putting Enduring Powers of Attorney in place  today.