A Power of Attorney is a document giving the person you appoint the power to do anything at law you can do such as pay bills, buy and sell real estate or shares, open and operate bank accounts, enter into litigation, enter into nursing homes, and hostel contracts.

If you own property, or have the possibility of inheriting property, you must have an Enduring Power of Attorney in place. You never know when these powers may be required during the course of your life. Any one of us could suffer a severe accident or a sudden mental disorder requiring a third party to act on our behalf. It is important to properly consider who you appoint.

Below are two real-life stories that illustrate the need for a Power of Attorney.

Peter and Sally

Peter and Sally were an upwardly mobile newly married young business couple. They had just moved into their new home in one of the burgeoning Western Sydney suburbs and the cost of that home was $895,000 with a 5% equity.

The mortgage of this property was secured with a guarantee from Sally’s parents and the usual terms and conditions with a large monthly repayment. To celebrate they went to the Hunter Valley and stayed for several days. However on their return Peter who was a bit of a speedster overturned their car, resulting in a serious crash.

Sally received minor abrasions and injuries but Peter had many broken bones and severe head injuries. He was transported to Westmead Hospital where he was in a coma and in a critical condition. Peter had no salary or trauma insurances and in fact only had about a week’s holiday leave. They could not pay the mortgage on Sally’s salary alone. Fortunately their conveyancing lawyer had recommended putting in place an Enduring Power of Attorney. Registering the Enduring Power Of Attorney, Sally was able to quickly put the house on the market.

In Sydney’s rising property market the house soon sold and in fact not only did they recover their 5% deposit but an increase of about $80,000 in capital gain. This is one of those good news stories.

Mrs Agnes Fong

Agnes was aged 86 years and severely demented with advanced Alzheimer’s disorder. Her son John came to see Owen Hodge Lawyers as he had negotiated a Refundable Accommodation Deposit (RAD) and appropriate long term care in a quality nursing home not far from where he lived.

It would be necessary to sell Agnes’s home to pay for the deposit. Fortunately John was able to show me the Enduring Power of Attorney which appointed his brother Russell and him jointly. However, John advised that sadly Russell had passed away some months prior. I reluctantly advised John that the Enduring Power of Attorney was invalid because of section 46 of the Powers of Attorney Act 2003. That section renders a Power of Attorney invalid where one of a jointly appointed attorney dies.

Sadly Agnes had no valid appointment to act on her behalf. What could she do? The only avenue was for John to apply to the Guardianship Tribunal for an appropriate order. This would most probably take many months by which time the wanted retirement accommodation would no longer be available.

Who should you appoint?

If you are in a long-term relationship you normally appoint your partner or spouse. Otherwise you appoint two or more trusted friends. Those friends should be appointed to act jointly with appropriate safeguards if one of them resigns or dies or suffers loss of cognition.

In most cases, if you are appointing persons of your own generation you will appoint a supplementary power of attorney appointing two or more persons a generation below you in age (your children or nieces and nephews).

What can your attorneys do?

Subject to any further provisions in the document itself your attorneys, whilst you have cognition, can do anything for you with your consent. For instance you might be on an overseas trip and require your attorneys to transmit funds or similar. If you lose cognition your attorneys can do any act on your behalf that is in your best interests. This latter point is a primary safeguard your state of mind.

Basically, subject to the document itself, your attorney can do for you anything that you lawfully can do yourself.

For this reason the Enduring Power of Attorney is a very powerful document. It should be carefully prepared and explained to you. The attorneys must be people you trust. Furthermore the test of cognition for the person making the Enduring Power of Attorney is even stronger because of statutory provisions than that for making a Will. Your experienced Estate Planning lawyer will explain these matters to you.

What if you do not have a Power of Attorney?

The risks are real including:

  1. You have not appointed persons to control your assets in the event that you lose cognition.
  2. Persons may be appointed whom you would never have appointed yourself.
  3. Persons may apply to the Guardianship Tribunal for it to make relevant provisions by way of appointment of an Attorney or in a worst case scenario appoint a Financial Manager over your estate. Again you lose control and there are risks of hefty fees payable by your estate.
  4. Various family members may strongly disagree as to the way forward and Guardianship Tribunal matters may be contested and inappropriate orders made. By inappropriate, we mean orders that you would not necessarily yourself want.
  5. Applications to the Guardianship, tribunal may incur unnecessary expense.

More information? To find out more, give us a call on 1300 023 782 or email team@cdrta.com.au.

Schedule Appointment

The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)

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Craig is the principal consultant of C&D Restructure and Taxation Advisory and has been working in the industry since 1999. Having established C&D Commercial Partners in 2015 the precursor to the current business.

Post Author: Craig Dangar

Craig is the principal consultant of C&D Restructure and Taxation Advisory and has been working in the industry since 1999. Having established C&D Commercial Partners in 2015 the precursor to the current business.

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