Power of attorney: If you haven’t got one, you haven’t finished your later-life planning

You’ve done your will and feel that’s all of your later-life planning done? Think again, says a prominent elder law specialist, because your will is only useful in ensuring your wishes are met after you’ve died. Setting up a power of attorney, however, is key to ensuring your dearest health and financial wishes are met during life.

“I often tell audiences I present to that they’re mad if they don’t have one in place and worse, it’s probably too late because they’re mad!” CRH Law partner Brian Herd says. “Doing nothing is not an option.”

Why is a power of attorney important? Because it’s a relatively simple way of empowering an individual to enact your wishes should you be unable to do so. Without one, you may be left to the best intentions of your family or even the law.

Here’s a plain language explanation of how it works.

Do you need a GPOA or EPOA?

There are two forms of power of attorney, a general power of attorney (GPOA) and an enduring power of attorney (EPOA).

The person or people you select as your GPOA have the power to make only financial decisions, so this version of power of attorney is usually used for shorter-term functions such as, for example, if you are going overseas for an extended period and need someone to oversee your banking or property while you’re away.

“A general power of attorney will generally last until it is revoked by various events but, most importantly, will come to an end if the person who made it loses their capacity,” Herd told Starts at 60.

(To understand the important concept of ‘capacity’, the legal definitions of which differ slightly depending on where you live in Australia, you can read more here. In short, EPOAs are extremely difficult, if not impossible, to set up if you have been assessed as having lost capacity.)

The person or people nominated as your EPOA, on the other hand, can make financial, personal and health care decisions on your behalf. However, neither an EPOA or GPOA can make or change your will, vote for you, make decisions on sterilisation or pregnancy termination or consent to your marriage.

An EPOA  differs from GPOA mainly in that the agreement doesn’t end if the person who made it loses their capacity to make decisions independently. “It ‘endures’, which is exactly what you would want it to do,” Herd added.

That means that should, for example, you develop a condition such as Alzheimer’s disease that eventually prevents you making decisions on your own treatment, your EPOA can step in to ensure the instructions you left while you were able to make decisions are followed. A GPOA would not be able to do so.

The EPOA agreement can be broken down into further ‘responsibilities’ such as financial, health-related and guardianship. In some states and territories, multiple people can be appointed to each cover a specific area, while in others responsibility for all areas remain with just one person.

Herd says that although it may seem appropriate to divide responsibilities between family members or friends due to their individual expertise, it’s often best to appoint the same person for all purposes.

“I have often seen parents appoint their daughter (a nurse) to make personal and health care decisions and separately, their son (an accountant) to make financial decisions based on their respective professional expertise,” he explained. “This can be a disaster as it often leads to tensions and demarcation disputes, which is best avoided.”

Big issues to consider when appointing your POA

Unfortunately, according to Herd, a lot of people dismiss the need for a power of attorney because they believe their close family members will be able to make all the necessary decisions should something happen that prevents them from doing so. In fact, however, without a power of attorney, no one has the legal authority to make and enact financial decisions for another person.

Instead, family members would have to go down the long and expensive path of making an application to the relevant civil and administrative tribunal in your state or territory to become a decision-maker, also known as guardian, on your behalf.

“It emphasises the old adage; the cost of doing nothing will always exceed the price of doing something,” Herd noted.

Usually in a conventional family situation, the spouse appoints their other spouse and vice versa as their EPOA, and as a fallback position, one or more of their adult children. However, what you should consider and who you should nominate depends on a number of factors, as discussed below.

Read more: Are you suffering from the very expensive condition called ‘hapathy’?

Overall, however, Herd said it was best to appoint people that you know, trust and who are, preferably, younger than you.

“That is easy to say but family dynamics and personal circumstances can change over time,” he added. “Needless to say, you should change your EPOA to reflect these changes, provided of course you have the mental capacity to do so.”

It’s also possible to appoint a trusted professional adviser such as your lawyer as your EPOA.

What issues should I be aware of?

As with any other legal matter, there are a plethora of issues that can arise when it comes to a POA. According to Herd there are a number of common issues that tend to pop up with clients.

The first relates to large families that have many children. In this case it’s best to keep the document relatively diplomatic but practical, Herd says. In short, it should be as inclusive of as many children as you wish, but not so many that decisions cannot be made quickly. After all, an EPOA can make decisions on emergency medical treatment, where lengthy discussion could literally be a matter of life or death.

“If you have lots of children you can achieve both aspirations by being a little bit clever in how you do the document, for example, by appointing two of the children but requiring them to keep the other children informed,” Herd said.

Blended families can also result in some difficult situations because they often offer multiple options as to who should be appointed the position of EPOA.

“Conventionally, a parent tries to maintain a balance of forces or an equilibrium by appointing their second spouse with a child from the first marriage but the options are numerous,” Herd explained.

The last issue Herd commonly sees are around the special inclusions some people include in their EPOA agreement. This could be setting out specifications on caring for a family members with different abilities, specifying that the person appointing the EPOA only wishes to live in a particular aged care facility, or even assuring the future care of a family pet. This should all be discussed with the person appointed as the EPOA during the appointment process.

EPOAs are state- or territory-based legal instruments and although there are forms that allow you to appoint your own EPOA, you may wish to seek legal advice on doing so, to ensure that your documentation is very clear on what, when and how decisions should be made on your behalf.

Once in place, unless you sign a legal document revoking the EPOA, the agreement is only extinguished in the event of your death or that of your EPOA nominee.

You can find more information on the powers of attorney laws in your state or territory at the federal government’s MyAgedCare website.

Have you appointed someone as your GPOA or EPOA? How did you find the process – easy or complex?

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.