Why Have a Power of Attorney?

What is Probate and how does this relate to a Power of Attorney?

What is Probate? This isn’t always required but essentially, it’s when the Supreme Court recognises that a Will is valid. As you will see below however, Power of Attorney is totally different and in fact, ends upon death.

We have found that many people believe that a spouse (whether married or de facto) is able make decisions on behalf of their partner, as a matter of right, due to their relationship.

This is simply not the case.

The decision making process is solely within the purview of each individual person and is generally only able to be transferred to another when a person enters into a Power of Attorney document.

When a person (known as the Principal) enters into a Power Attorney document they are, in effect, transferring their power to another person (known as the Attorney).

It is the transfer of this personal power which permits an Attorney to make decisions for and/or act in the place of the Principal. The types of decisions that an Attorney can make are broad ranging, from financial matters, such as selling a house, taking care of the finances to personal/heath matters such as deciding about where a person will live. A Principal can also limit an Attorney’s power, should they wish to do so, or expand upon it to allow the Attorney to enter into conflict transactions. This is particularly relevant where an Husband/Wife has been appointed as an Attorney.

Where an Attorney has also been appointed to make decisions regarding Personal/Heath matters, this power only commences when the Principal has lost his or her mental capacity.

Having a valid power of attorney is beneficial for a number of reasons, such as:-

• older people are able to appoint the person they want to take care of things
  for them should s/he not be able to do so in the future;
• going overseas for an extended time, and want a person in Australia to take
  care of things;
• where a person suffers poor heath and wants to ensure that their affairs
  are in order should they lose capacity.

Powers of Attorney documents are also beneficial should you have an accident and lose your mental capacity.  In this instance, should you not have a Power of Attorney, a relative would need to apply to the Tribunal to be appointed as your Guardian and Administrator.  This can be a lengthy process and it may be that necessary a government body would have to look after you/your affairs until any other appointment has been made.

There are two types of Power of Attorney Documents, being:-

• A General Power of Attorney – this type of document is generally only used when a Principal wants their Attorney to operate on their behalf for specific transaction.  These types of transactions are generally involve commercial transactions and do not permit the attorney to make decision for the health care of the principal.
• An Enduring Power of Attorney – this type of document is generally used when a Principal wants to ensure that the Attorney can act on their behalf for a full range of financial matters, and also assist the Principal should he or she need assistance in Personal/Health Matters upon the loss of mental capacity. However the primary difference between these two types of documents is that the power provided under a General Power of Attorney will end on when the Principal losing his or her mental capacity whereas the Enduring Power of Attorney will continue to remain in full force and effect.

When appointing an Attorney, the Principal should appointment a person whom they trust will act in their best interests.  There are also other requirements, such as your attorney not being your paid carer or health care provider.

Problems can occur if the Power of Attorney document has not been completed correctly or it not been witnessed correctly.

A witness’s duty extends further than merely witnessing the Principal’s signature. The witness must also judge whether or not the Principal understands the nature and effect of the Power they are providing.

If not, then the power of attorney can be challenged by any interest party.

Therefore, it is important that if you are considering providing this Power to another person, that you be properly informed, by a legal practitioner, as to the nature and effect of the Powers you are providing to another person(s) under the Power of Attorney document.

If you are still asking yourself – What is Probate? – check out our document of Technical Details.

Video

Prefer to watch a video? Our principal, John McLaughlin, provides an informative Law Talk episode about the Enduring Powers of Attorney