Power of Attorney
What is the purpose of a Power of Attorney?
A Power of Attorney is a legal document that appoints a person or people called the Attorney(s) to do anything that the principal may lawfully do – for example, buying and selling real estate or operating bank accounts – subject to any conditions or limitations set out in the document. An attorney can be any person over the age of 18 years who has the capacity to help the principal with money or property. Often they are a relative, friend or professional adviser. You may also appoint a substitute attorney who can step in and act if the primary beneficiary is unable or unwilling to act.
The person that makes the Power of Attorney is known as the ‘Principal’. To make a power of attorney, the principal must be an adult and have the capacity to understand the document – that is, they understand the authority of the attorney and what decisions they can be make, when and how the attorney may exercise their power, the effect of the attorney’s actions on the principal and how to revoke or change the appointment in the future.
Your solicitor can advise you on what powers you can give to your Attorney, after considering your circumstances. There are some things an Attorney will not be permitted to do without something more. For example, the general position is that an attorney cannot act for the principal as a company director. There are some exceptions to this, and your solicitor can let you know the correct legal position after taking careful instructions. You should carefully consider the person/s you are appointing as your Attorney because you are appointing them to make important decisions for you.
The power of attorney will operate immediately from when it is signed unless otherwise specified in the document. An enduring power of attorney does not confer authority until the attorney signs the document which can occur at any time. If you have appointed more than one attorney, the authority will only extend to those who have signed the document.
What are the different types of Power of Attorney?
There are two types of Attorneys – General Attorneys and Enduring Attorneys.
A General Power of Attorney is usually given for a specific period and/or for a specific task. It will cease once that period expires, or task is completed. It will also cease should the principal lose capacity.
An Enduring Power of Attorney continues to operate even after the principal loses capacity. For the power to be an enduring power of attorney, the document must expressly state that it will continue after the principal lacks capacity. Once the principal loses mental capacity, they cannot revoke the power of attorney. The principal’s signature must also be witnessed by a prescribed witness, usually a solicitor, and the prescribed witness must provide a certificate in accordance with the relevant legislation.
The principal must have legal capacity to appoint an attorney. The legal position is a person who is 18 years or older is presumed to have legal capacity until it is rebutted. Simply because the principal struggles with complicated processes or finds routine transactions difficult, does not mean that they lack legal capacity. Whether a person lacks legal capacity will depend on three things:
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Do they understand the facts of a situation and the options available?
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Can they weigh up the consequences of each option and understand how those consequences may affect them or others? ; and
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Are they capable of communicating their choice?
Your capacity to make different types of decisions can be affected or lost due to illness, disorders such as dementia, or impacts from an accident. It is important to understand that a person’s capacity to make certain decisions can also fluctuate, depending on the time of day, their environment or whether they are under the influence of medications or alcohol. If your solicitor has any doubts as to whether you lack capacity to instruct them, they will decline to act until or unless they receive evidence from a qualified doctor that you have capacity.
To avoid disappointment and unnecessary stress for you and your loved ones, it is therefore important that you plan ahead and prepare your Enduring Guardian before you lose capacity.
What decisions can an Appointed Attorney make on your behalf?
Attorneys in NSW can be appointed to make the following kinds of decisions:
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Financial – such as paying bills and other expenses
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Legal – making investments and selling or buying property.
You may also allow your attorney to use your money and assets according to additional powers you choose including authorising your attorney to:
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act despite conflicts of interest;
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act in relation to digital assets i.e. digital devices, accounts and records;
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to give reasonable gifts to other persons;
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to confer benefits on the attorney or any other person (i.e. spouse or children) to meet their reasonable living and medical expenses; and
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to deal with your superannuation assets.
In addition to the above, the principal can place limitations and conditions on the attorney’s power to only carry out certain tasks. For example, the principal can specify that the attorney may only act to sell the principals home, or to deal with shares or they may require the attorney to submit accounts to a nominated accountant every year for auditing.
Who can be an Attorney?
An attorney must have full legal capacity. The Prescribed Form for the Enduring Power of Attorney contained in the Powers of Attorney Regulations 2016 (NSW) notes that the attorney appointed must be over 18 years of age and must not be a bankrupt or insolvent. It also recommends that if the Principal’s affairs are complicated, an attorney should be appointed who has the skills to deal with complex financial arrangements.
Multiple attorneys can be appointed as first choice. It is also strongly recommended that a Principal appoint a person(s) as a substitute attorney in the event that a first choice attorney is unable or unwilling to act.
Multiple attorneys may be appointed to act either “Jointly” or “Jointly and Severally”. When appointed Jointly, they must all act together whereas if appointed Jointly and Severally, they may act together or individually.
Even where attorneys are authorised to act Jointly and Severally, the Principal can still require them to act Jointly for transactions above a particular threshold. For example, the Principal may require the attorney’s to act jointly when making transactions above $5,000.
A Power of Attorney cannot be used for health or lifestyle decisions. You should appoint an Enduring Guardian if you want a particular person to make decisions relating to access to support services, health care, and decisions about where and with whom you live and the medical treatment you receive.
The Attorney’s duties
The law requires Attorneys to observe the following duties:
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Make decisions that the Principal would have made – consider the Principal’s wishes and preferences
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Manage the Principal’s affairs responsibly – act in their best interests and keep records
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Keep the attorney’s own money and property separate from the Principals money and property unless they are joint owners or operate joint bank accounts.
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Act with honesty and in good faith.
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Work with other decision-makers.
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Make decisions that are the least restrictive of the Principal’s freedom.
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Protect the Principal from neglect, abuse, or exploitation.
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Act within the limits of their appointment – start date, powers, limitations.
If the Attorney is signing certain documents that affect real estate, the Power of Attorney must be registered. In New South Wales, the document would be registered with New South Wales Land and Registry Services (NSWLR) formerly Land and Property Information (LPI).
How to appoint your Attorney?
An Enduring Power of Attorney does not operate to confer any authority on an attorney until the attorney has accepted the appointment by signing the document creating the power.
The Principal elects when the Power of Attorney is to commence to operate. For example:
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Once the Attorney has accepted their appointments by signing the Power of Attorney document; or
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Once a medical practitioner considers that the Principal is unable to manage his/her affairs and provides a document to that effect; or
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Once the Attorneys consider that the Principal needs assistance managing his/her affairs; or
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Other – i.e. by a specified date.
If you need a Power of Attorney for interstate or overseas, you may need to make a Power of Attorney under their laws. The laws of some other States and Territories in Australia may give effect to a Power of Attorney in NSW but if should not be assumed this will always be the case.
Revoking a Power of Attorney
You can cancel a Power of Attorney at any time as long as you have the capacity to do so. A revocation must be in writing and given to the Attorney.
For a discussion of how to assess capacity, please see the NSW Justice Capacity Toolkit.
A document revoking a power of attorney must state:
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The name of the Principal.
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The date of the Power of Attorney if not registered.
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The registered number of the Power of Attorney if registered.
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The date of the revocation; and
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The words “hereby revoke”.
Unlike a Will, the creation of a new Power of Attorney does not automatically revoke a pre-existing Power of Attorney.
