By Anna Hacker, Accredited Specialist – Wills & Estates, National Manager, Estate Planning, Australian Unity Trustees Legal Services

When people consider estate planning they often only think about what happens after they pass away but ensuring they are protected during their lifetime if they lose capacity is just as important.

The best way to ensure you will be protected is to have valid enduring powers of attorney in place.

Recent Case – How Much Power Does an Attorney Get?

The recent case of Re Narumon Pty Ltd [2018] QSC 185 found that an attorney had the power to confirm an existing binding death benefit nomination for a self managed superannuation fund, a question long considered by the legal profession and superannuation fund members.

This confirms that the power of an attorney does extend to this role while the Court was not willing to extend it further to varying the terms of the binding death benefit nomination.

This case highlighted the potential for conflict in this role if an attorney has to consider their own interests and other possible beneficiaries when confirming (or not confirming) a binding death benefit nomination.

While this case did not expand its consideration beyond the role of the attorney for a binding death benefit nomination, it is not unreasonable to think that this case is the first of many related to the reach of an attorney’s power in relation to self managed superannuation funds, and superannuation in general, as well as trusts.

It is therefore vital for anyone appointing an attorney to consider whether they want that person or persons to have significant control over not only their personal assets but also assets that are technically outside of their personal wealth such as superannuation.

Recent changes to state-based rules

Each state has very specific legislation when it come so to enduring powers of attorney and how those documents can be prepared. Each state is also unique in the way in which attorneys are appointed and all documents are different. While they are all legally allowed to be used in all states, if you have assets in a particular jurisdiction, it is a good idea to ensure the documents you have in place will actually be appropriate to deal with those particular assets.

Victoria recently had a change of documentation and the enduring power of attorney (medical treatment) was replaced with an advance care directive, similar to those in the Australian Capital Territory, Queensland and Western Australia.

The older documents are still valid but the new ones allow for greater clarity around end of life decisions and medical wishes. They also must be completed by a medical practitioner, rather than a lawyer.

In addition, Victoria replaced the older enduring power of attorney (financial) and appointment of enduring guardian with a single document – the enduring power of attorney. This allows a person to appoint a financial and a personal attorney, effectively replacing the previous roles with new names.

Each state has different legislation, and documents have been updated recently in a number of states.

Five of the biggest mistakes people make with enduring powers of attorney

1. Choosing the wrong attorney – an attorney gets a significant amount of power when it comes to your finances and lifestyle choices. Choosing the wrong person may mean there is increased conflict in your family and may lead to decisions being made that are not ones you would have wanted.
2. Having only a financial enduring power of attorney – there are a few different types of documents required to cover all aspects of your life after you have lost capacity. If you do not have one that covers medical decisions, your family may still need to go to a Court or Tribunal to have a guardian appointed.
3. Ignoring specific requests that you have – an attorney must act in your best interests, even if it is something that you would have chosen to do if you had capacity, for example, making gifts to charity. If it is important to you that these gifts continue, these specific wishes must be included in the document to ensure they occur.
4. Confusing the role of executor and attorney – an attorney acts during your lifetime but their role ceases as soon as you pass away. At that point, an executor takes over. A common error is that people confuse these two roles or believe that an attorney still has power after someone passes away. In reality, if they continue to act, they have breached their obligations and have acted illegally.
5. Not understanding the technicalities of the documents and roles – an attorney can have wide ranging powers when it comes to what they can do, such as signing a contract on your behalf or paying bills but they do also get full control of your self managed superannuation fund and potentially also your family trust so it is important that if that is not your intention, that there are limits in place.

What is an enduring power of attorney?

An enduring power of attorney is a formal instrument by which one person empowers another person to act on their behalf for certain legal and financial purposes (e.g. dealing with bank accounts, transferring money, paying bills, dealing with investments, or buying and selling real estate) when they are unable to manage their own affairs.

For example, you might be unavailable to make financial decisions or you may be unable to manage your finances due to serious illness or accident, or loss of capacity.

An enduring power of attorney will give that person the authority to act on your behalf.

You can appoint an attorney for a limited period, or an indefinite period. The latter applies until you pass away or act to revoke it.

A ‘general’ power of attorney ceases to be valid when the person who donated the power loses capacity to manage their own legal and financial affairs.

An ‘enduring’ power of attorney is required should you suffer loss of mental capacity

For a power of attorney to remain valid after you lose your mental capacity, you must make an ‘enduring’ power of attorney while you still retain mental capacity.

An enduring power of attorney is an important consideration for everyone, not just people who are older or with a known illness that may affect mental capacity.

For example, if you have an accident or a sudden illness that causes you to lose capacity to manage your financial affairs, no one will be able to access your assets on your behalf, such as your bank account or superannuation, unless you have an enduring power of attorney and ensure your needs and wishes are paramount and taken into consideration as financial decisions are made.

Your investments may require an important action to be taken, but you might not be in a position to do so. A family member or a friend could apply to be appointed as your financial manager or administrator, either through a Civil and Administrative Tribunal or the Guardianship Board (depending on the State in which you live), but this could take considerable time.

It is therefore in your best interests to have already prepared an enduring power of attorney so that the appropriate actions can be made in a timely manner.

Who can you appoint as your attorney?

Your attorney has full authority to deal with your legal and financial affairs and you should appoint someone you trust. Most people chose either a family member or close friend or a trustee company (such as Australian Unity Trustees Ltd) to act as their attorney.

Disclaimer: This article is not legal or personal financial advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every reasonable care has been taken in distributing this article, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information contained within it. Any views expressed are those of the author(s) and do not represent the views of Australian Unity Personal Financial Services Ltd. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Taxation Information in this document should not be relied upon without seeking specialist advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in November 2018. © Copyright 2018