As we navigate through life, we often focus on building financial security, making investments, and planning for the future. However, we often overlook the possibility of our incapacity due to unexpected events, accidents, or illnesses. In such circumstances, it becomes crucial to have a plan in place to protect your financial interests and to ensure that your affairs are managed according to your wishes. This is where an Enduring Power of Attorney (EPOA) comes into play, providing a powerful tool for safeguarding our financial future.
Understanding Enduring Powers of Attorney
An EPOA is a legal document that authorises a trusted individual, known as the Attorney, to make decisions on your behalf if you become incapacitated and are unable to manage your financial affairs. By appointing someone you trust, you can ensure that your financial interests are protected, bills are paid, investments are managed, and any legal or administrative matters are taken care of promptly and efficiently.
Why Establish an Enduring Power of Attorney?
Ensuring Control and Decision-Making Power
While it's uncomfortable to contemplate a scenario where you're unable to make decisions for yourself, it is necessary. An EPOA safeguards your financial future and offers you the peace of mind that your financial affairs will be well-managed by someone who understands your wishes and can act in your best interest. You have the opportunity to select a person who knows your financial situation, values your best interests, and is capable of handling financial matters competently.
Preventing Financial Mismanagement
In the absence of an EPOA, financial matters can become complicated and potentially mismanaged. Bills may go unpaid, investments may be neglected, and opportunities for financial growth could be missed. By appointing a trusted Attorney, you mitigate the risk of financial mismanagement and ensure that your assets are protected. It is important to note that once appointed, your Attorney is legally obliged to act in your best interest. They are not allowed to benefit personally from their position, must keep accurate records of transactions, and must keep your money and property separate from their own.
Avoiding Court Intervention
Without an EPOA, the court may appoint a guardian or financial manager, who may not have the same understanding of your preferences or financial goals. Consequently, your loved ones may have to endure a time-consuming and expensive court process to obtain the authority to manage your affairs. This can be emotionally draining and financially burdensome, leaving your loved ones in a state of uncertainty during an already challenging time. By having an EPOA in place, you simplify the process and eliminate the need for court intervention.
Appointing a Trusted Individual as Your Attorney
Choose the Right Person
When appointing your Attorney, it is crucial to select the right person or professional organisation. You can appoint one or multiple Attorneys; however, it is important to select someone who is reliable, responsible, and capable of making sound financial decisions. It may also be useful if they have a good understanding of financial and legal matters. Consider their ability to manage finances, their availability, and their willingness to take on the responsibility. You should have a candid conversation with the individual you wish to appoint to ensure they understand your intentions and are comfortable accepting the role. Without a clear understanding of their duties and responsibilities, your Attorney may manage your finances against your preferences, resulting in unfavourable outcomes.
Alternatively, if you are not comfortable appointing an individual, you can select an organisation (such as the Public Trustee) to act as your Attorney.
Seek Legal Advice
Since the EPOA document is a legally binding document, it must be executed in accordance with specific legal requirements. It is advised that you consult with a solicitor who is experienced in Estate Planning as they will guide you through the process, help you understand your options, and ensure that the document is properly drafted, signed, witnessed, and registered, if necessary, to make it valid and enforceable. An experienced solicitor can also provide advice on specific provisions to include, such as restrictions, limitations, or conditions that align with your wishes.
Prepare the Enduring Power of Attorney
While creating an EPOA is a relatively straightforward task, it is of paramount importance that it is done correctly. In order to put in place an EPOA, you must be of sound mind. As discussed previously, your solicitor can assist you with the preparation of the document.
In Queensland, you can complete an EPOA using a short form or a long form. Whilst the short-form version is more commonly used, a long form allows you to appoint different Attorneys for different purposes. For example, you may wish to appoint one individual for personal (including health) matters only, and another for financial matters.
As a general overview, an EPOA will require the following information:
Personal details: You will need to provide your full legal name, residential address, and contact details. Likewise, you will need to include similar information for your chosen Attorney(s).
Appointment of Attorney(s): You must specify who you are appointing as your Attorney. If you are appointing more than one person, you must state whether they are to act 'jointly' (must agree on all decisions), ‘severally' (can make decisions independently), or by a majority (more than half of your Attorneys must agree). You can also elect to appoint a successive Attorney, in the event that your appointed Attorney can no longer act.
Scope of Powers: You can appoint your Attorney(s) to make personal and/or financial matters. These powers can be broad or restricted. For instance, you might grant your Attorney general power to manage all your financial affairs. Alternatively, you could limit their authority to specific tasks like paying bills, managing investments, or selling properties.
Start Date and Conditions: Decide when your EPOA will come into effect. Most EPOAs are designed to start when you lose your capacity, however, you can appoint your Attorney(s) immediately. If there are other conditions for activation, these must be clearly stated.
Signatures: You will need to sign and date the document in the presence of a witness. The witness must be a Justice of the Peace, Lawyer, Commissioner for Declarations or a Public Notary. The EPOA must be signed by the witness to acknowledge that you understand the EPA, and that no pressure was applied on you to create it. Your Attorney(s) must also accept their appointment by signing the document.
Before your Attorneys can deal with any real estate, the EPOA document must be registered in the Land Titles Office. This will involve further expense by way of lodging fees.
It is also important to be aware that unless you select otherwise when preparing the EPOA, it will only be enforceable once you’re deemed to be mentally incapacitated. Such determination will be made by a court or health care professional.
Communicate Your Wishes
Once your EPOA is in place, it is crucial to communicate your wishes to your Attorney. Discuss your financial goals, priorities, and any specific instructions you may have. By having an open and ongoing dialogue, you can provide guidance and ensure that your Attorney understands your desires regarding investments, charitable contributions, healthcare expenses, or any other financial matters.
Your Attorneys should also be aware of the terms of your latest Will, as decisions your Attorneys make may affect entitlements in your estate and can place them at risk of liability.
As long as you have the mental capacity, you can revoke or change your EPOA at any time. If your chosen Attorney is not managing your finances appropriately or your relationship changes, you can appoint someone else.
Conclusion
Establishing an Enduring Power of Attorney is a vital step in safeguarding your financial future in the event of incapacity. By appointing a trusted individual, you ensure that your financial affairs will be managed according to your wishes, minimising the risk of financial mismanagement or court intervention. You should seek the guidance of an experienced solicitor to navigate the legal requirements and create an EPOA that provides you and your loved ones with peace of mind. Don't wait until it's too late – take control of your financial future today by establishing an Enduring Power of Attorney.
Article by Isabella Parsons
Law Clerk at Robbins Watson Solicitors
https://robbinswatson.com.au/our-people/isabella-parsons