While wills are a well-understood element of estate planning, they only enact your wishes around your financial and personal assets after you have died.
Have you considered how important personal and financial decisions would be made on your behalf in the event of an accident, or if you were diagnosed with Alzheimer’s disease, dementia or some other condition that prevented you from doing making those decisions yourself?
This is where an enduring power of attorney (EPOA) can provide a safety net that gives you peace of mind that your wishes will be followed when you’re unable to do so personally.
An EPOA is a legal document in which you nominate a representative or representatives to make personal, legal and financial decisions on your behalf.
You can entrust one person with decisions in all the above areas, or have separate EPOAs for each matter. The latter does mean the appointed people may need to work together to enact your wishes as a group, however, so it’s key that you choose your representatives wisely.
Personal decisions relate to your care and welfare (for example, consenting to medical treatment or deciding where you will live). Your attorney’s power to make these decisions on your behalf commences when you lose capacity to make them.
An EPOA representative can’t make decisions on, for example, consenting to marriage, sterilisation, or the termination of a pregnancy.
Financial decisions relate to the management of your money and assets (for example, selling or renting your home, paying bills and investing your money).
For these types of decisions, you can nominate in your EPOA whether you would like your representative to begin making decisions on your behalf immediately or at some future date – such as if you lose capacity to make them.
The definitions of legal capacity differ slightly in each state and territory, but broadly speaking it means that you are considered capable of making decisions about matters that affect you.
You can read more about the concept of capacity here.
EPOAs are extremely difficult, if not impossible, to set up if you have been assessed as having lost capacity. This is why it’s important to consider having one in place well in advance of when you might actually need it.
“Many people have wills drawn up, but don’t consider what would happen in the event of an accident or unexpected medical diagnosis. You could lose capacity unexpectedly at any time,” Tim Howard, from BT Financial Group’s financial literacy and advocacy team, explains.
It’s important to remember that a general power of attorney – which is when you appoint someone to make financial decisions on your behalf for a specific period or event – can only be used while you can still make your own decisions.
“A general power of attorney stops being valid when you lose capacity. Everyone should consider having an enduring power of attorney in place – it really offers a safety net,” Howard says.
EPOAs are state-based legal instruments and while there are forms which allow you to create them yourself, he recommends seeking legal advice.
“A good legal adviser will ensure the document reflects the type and scope of decisions that can be made on your behalf,” Howard says. “And if you have nominated more than one attorney, the document should clarify how decisions will be made.”
Other than when you sign a legal document to revoke it, an EPOA is only extinguished in rare circumstances, including on your death or the EPOA nominee’s death.
You can also find more information on the related laws in your state or territory at the federal government’s MyAgedCare website.
Have you got an EPOA, or acted as an attorney for another person? Would having your wishes set out in a legal document give you greater peace of mind?
Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.