Power of Attorney vs Enduring Power of Attorney
Both Powers of Attorney and Enduring Powers of Attorney allow a person, referred to as a “donor”, to give certain powers to another person, an “attorney”, for specific circumstances. Those specific circumstances are what determine which document is required.
One of the main differences between a Power of Attorney and an Enduring Power of Attorney is that the Power of Attorney is revoked when the donor loses their mental capacity but the Enduring Power of Attorney is not.
Power of Attorney
Commonly mistaken as an Enduring Power of Attorney, a Power of Attorney is a document that gives another person the authority to act on your behalf in certain circumstances.
A Power of Attorney is only valid while the donor has mental capacity and allows an attorney to, for example, sign documents on the donors behalf while the donor is overseas or physically incapacitated.
These documents are very useful for directors of companies as it allows another person to sign on behalf of that director while they are out of the country (which can be very beneficial for sole traders).
Enduring Power of Attorney
There are two types of Enduring Powers of Attorney. These are:
- Enduring Power of Attorney in relation to Property; and
- Enduring Power of Attorney in relation to Personal Care and Welfare.
Enduring Powers of Attorney in relation to Property allow a donor to appoint a suitable attorney that will have authority to manage the donor’s property affairs (for example the attorney is able to step into the donor’s shoes to manage bank accounts, sell houses, and manage investments on the donor’s behalf).
An Enduring Power of Attorney in relation to Property can come into effect immediately, or only when the donor has lost their mental capacity. By choosing to have your Enduring Power of Attorney in relation to Property come into effect immediately, it can make it easier for your Attorney where there is uncertainty as to the mental capacity, especially if capacity changes from day to day.
On the other hand, an Enduring Power of Attorney in relation to Personal Care and Welfare can only come into effect when the donor loses their mental capacity. An assessment as to mental capacity has to be made by a medical practitioner before this type of Enduring Power of Attorney can come into effect. Enduring Powers of Attorney for Personal Care and Welfare allow an attorney to make decisions on behalf of the donor as to the donor’s health and wellbeing (for example the attorney would be able to make a decision as to whether the donor needs to be put into full-time care).
Both the Enduring Power of Attorney in relation to Personal Care and Welfare and the Enduring Power of Attorney in relation to Property have a number of customisable options within each document. Your lawyer will be able to advise you as to the effect and implications of each option and the most appropriate options for your circumstances.
Why do you need an Enduring Power of Attorney?
If you lose your mental capacity and have Enduring Powers of Attorney in place, the only requirement on your chosen attorney is to put the necessary steps in motion to have the document come into effect (see “Enduring Powers of Attorney and Loss of Capacity” below).
If you lose your mental capacity without having an Enduring Powers of Attorney in place, your family or next of kin may need to make a number of applications to the Family Court just to be able to care for you and deal with your property. These applications include:
- The appointment of a Welfare Guardian;
- A Personal Order to allow for care decisions;
- An Order to Administer Property; and
- The appointment of a property manager.
The starting point for most families is an application to the Family Court to have a Welfare Guardian appointed. A Welfare Guardian is responsible for support and protection as well as acting in the best interests of the person they are acting for, however they are not immediately entitled to make decisions regarding that person’s personal care or property. Furthermore, Welfare Guardians essentially have an expiry date and at the end of their term another Court application will need to be completed to either extend the current Welfare Guardian’s term or appoint a new Welfare Guardian at an additional cost.
A Personal Order may also be required in situations where a person needs to go into care or decisions need to be made for that person’s medical treatment. Generally, a Welfare Guardian appointment and a Personal Order go hand-in-hand.
As at July 2018, if you lose your mental capacity and earn less than $20,000 per annum (either through work or through a Work and Income benefit) but there is no property requiring management that is worth more than $5,000, an application would need to be made to the Family Court for an Order to Administer Property. If the property or income is worth more than this, there would need to be an application to the Family Court for the appointment of a property manager.
There is no guarantee that the Court will appoint a Welfare Guardian and/or property manager, or make a Personal or Property Order in favour of someone that you may have chosen to appoint as an attorney while you still had your mental capacity. The costs involved and time required in any Court related process far outweighs the cost of setting up Enduring Powers of Attorney before mental capacity becomes an issue. Therefore, you can save your family a lot of stress, and money, by setting up Enduring Powers of Attorney while you still have the capacity to do so.
Enduring Powers of Attorney and loss of capacity
When a donor loses their mental capacity, the Attorney will need to take the necessary steps to ensure that the Enduring Power of Attorney, in which they are appointed, comes into effect before they can act on the donor’s behalf.
In order for the Enduring Power of Attorney to come into effect, the first step is to have the donor’s mental capacity assessed by a medical practitioner whose scope of practice includes assessing mental capacity. The medical practitioner must prepare a certificate in line with the form in the Protection of Personal and Personal Property Rights Act 1988 in order for their assessment to be valid. We can assist the doctor with the correct form if needed.
Once a valid medical certificate is obtained, your lawyer can provide a certified copy of that certificate and a certified copy of the Enduring Power of Attorney document. This causes the document to come into effect, allowing the attorney to exercise the powers in that document.
What to do
If you need assistance with any of the above, or would like to set up Enduring Powers of Attorney and/or a Power of Attorney, please get in contact with a member of the Asset Planning Team.
Hayley is a Solicitor in our Asset Planning Team and can be contacted on 07 958 7472.
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