This article highlights some of the fundamental issues surrounding Powers of Attorney. Hopefully the article will dispel some of the more common misperceptions about what can, when used correctly, be a useful planning tool.

I am mindful that not everyone knows what a power of attorney actually is. In simple terms it is a document that we, of sound mind and over the age of eighteen years, can complete. In that document we (known as “the Principal”) can appoint someone (known as “the attorney” to act on our behalf in financial and property matters.

Before going any further it is important to correct some of the more common misconceptions that some people may have in respect of powers of attorney.

1. There is no law that states that we have to appoint an attorney. However, there are laws which dictate what will happen if, for example, we were to lose mental capacity and not previously appointed someone to act as our enduring attorney.

2. Powers of attorney are not just for older people. Everyone over the age of eighteen years and of sound mind should consider appointing an attorney.

3. Powers of attorney are governed by state and territory legislation, that is, each state and territory has its own legislation (Act of Parliament) which governs the power of attorney in that state and territory.

4. In New South Wales Powers of Attorney are not for personal and health matters. If we want someone to make personal and health decisions for us, after we have lost mental capacity then we need to appoint an enduring guardian whilst we still have mental capacity.

5. Powers of attorney are only for the living, in other words when we die, the power of attorney dies with us. It is no longer a valid document and the attorney cannot continue acting in their role of attorney. On the death of the Principal it is the role of the executor (if there is a will) to manage the estate of the deceased person.

If we decide that it would be a good idea to appoint an attorney (or even more than one attorney) we have a number of choices open to us.

We might decide that we only want to appoint an attorney under what is known as a General Power of Attorney. We might want to use it for a one off transaction or several specific transactions. It may be the situation that we are going overseas and during our absence an important document has to be signed, for example, a document relating to the sale or purchase of a property. The important thing to remember with a General Power of Attorney is that it will cease to have any effect if we, the Principal, were to lose mental capacity.

On the other hand we may wish to put in place a document which will continue to have effect after we have lost mental capacity. In that situation we would appoint our attorney under an Enduring Power of Attorney.

We can choose how many attorneys we want, though it is important to be realistic about the number. We can say how we want them to act, for example, can they act individually (severally) or do we want them to act together (jointly)?

Whoever we choose to be our attorney/s we need to think first about what qualities we want in an attorney. Are they honest, are they good with money, are they available and do they understand their responsibilities? It is important to note that no-one checks up on an attorney, so we need to make sure that we have put sufficient thought into the appointment.

We can state when we want the power of attorney to come into effect, for example on a certain occasion or immediately just to mention two examples. Both the General and the Enduring powers of attorney provide for several options as to the commencement of the document.

We can put limitations on the powers that we grant to the attorney. For example we might state that we do not want our attorney to ever sell our home. However, before putting limitations on the attorney we need to think carefully about the effect of the limitation, is it really a practical one?

We are not required to register a power of attorney, unless we intend for the attorney to act in property matters, in which case it is to be registered with NSW Land and Registry Services (formerly known as NSW Land and Property Information).

We can, of course, revoke (cancel) the power of attorney at any stage, as long as we have mental capacity. It is important to note that if we do revoke it we need to notify the attorney that their powers have been revoked. Also, if we have provided a copy of the power of attorney to anyone, for example, a financial institution, then we need to notify them as well.

Powers of Attorney can be a great planning tool, but they need to be treated with the utmost respect and given very careful consideration. As there are specific witnessing requirements it is important to seek the advice of a solicitor who will prepare the document.