What is an Enduring Power of Attorney, and why should you have one?

You might’ve heard of an Enduring Power of Attorney – or even been appointed as an attorney for someone else yourself – but what exactly is this document, and what are the benefits of having one?

There are many reasons that clients may choose to make an Enduring Power of Attorney. The most common of these are:-

- To provide ease and flexibility for attending to daily transactions,

- To ensure that business continues to run smoothly (for example, when someone is unwell or overseas), and

- To ensure that someone they know and trust makes their personal and financial decisions, particularly upon their loss of capacity.

This blog will explain what it means to appoint an attorney, what decisions an Enduring Power of Attorney governs, and why it is one of the most essential estate planning documents you need not only to make your life easier now, but to protect your personal and financial decisions in the future.

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What is an Enduring Power of Attorney?

An Enduring Power of Attorney is a document that outlines who you would like to make your personal and/or financial decisions on your behalf.

Under the Powers of Attorney Act 2014 (Vic), financial decisions are defined as matters related to your financial and property affairs. For example, an attorney could:-

- Pay expenses on your behalf (such as bills, rates, taxes and other outgoings),

- Liaise with Centrelink, banks, and other institutions on your behalf,

- Make investments on your behalf,

- Buy, sell or transfer your property, and

- Withdraw money from or deposit money into your bank account.

On the other hand, personal decisions exercisable by an attorney include, but are not limited to:-

- Matters related to your personal or lifestyle affairs,

- Daily living decisions (such as diet and dress), and

- Decisions about where and with whom you will live (for example, whether you will move into Aged Care).

You might be thinking that these are extremely important decisions that an attorney has authority to make – and you are right. Appointing someone to act as your attorney is a big decision, and one that should not be taken lightly. It is important that an attorney is someone who you trust wholeheartedly with your personal and financial affairs.

In saying this, choosing to appoint an attorney does not mean that you are handing over your ability to make your own decisions about your personal and financial circumstances. There are several restrictions you can put in place that outline when, how and under what circumstances your appointed attorney can use their powers.

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Tailoring your Enduring Power of Attorney

When you are making your Enduring Power of Attorney, you can choose whether:-

1. The attorney’s power commences immediately; or

2. The attorney’s power commences only when you lose decision making capacity.

Whilst the first option provides ease and flexibility for many clients who want the ability to use the document straight away, the second option provides further protection so that if an attorney wishes to exercise their powers, they must have a letter from your doctor that outlines you are no longer able to make those decisions for yourself.

Other restrictions you can put in place include:-

1. Limiting an attorney’s powers to certain personal or financial matters,

2. Appointing two attorneys who must act jointly in all transactions, and

3. Putting a monetary limit on the kinds of transactions that an attorney can act on.

Further to the above, who you decide to appoint as your attorney is bound by several decision-making principles set out in the legislation. This means that when they are exercising power as your attorney upon your loss of capacity, they must:-

- Act in a manner that is as least restrictive of your ability to decide and act as possible, given the circumstances

- Ensure that you are given practicable and appropriate support to enable you to participate in decisions affecting you as much as possible, given the circumstances

- Give all practical and appropriate effect to your wishes

- Act in a manner which promotes your personal and social wellbeing (this includes protecting your dignity and having regard to your existing supportive relationships, religion, values and cultural needs), and

- Protect your confidential information.

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What happens if I don’t have an Enduring Power of Attorney?

The law in Victoria does not automatically appoint any person to be your attorney.

If you lose capacity and don’t have a valid Enduring Power of Attorney in place, the Victorian Civil and Administrative Tribunal (VCAT) is required to step in and appoint an administrator and/or guardian to handle your financial and/or personal decisions on your behalf.

Whilst this process provides a back-up option for those that do not have a power of attorney document, there are several factors to be wary of. These include:-

1. It is time consuming. Obtaining a VCAT Guardianship & Administration Order can take several weeks or months, depending on VCAT’s capacity. During this time, no personal and/or financial decisions can be made on your behalf, and your affairs may effectively be held in ‘limbo’ whilst VCAT makes their decision.

2. It is costly. Obtaining a VCAT Order can cost thousands of dollars in legal fees.

3. It means that you don’t get to make the decision about who handles your personal and/or financial affairs. If VCAT steps in, this is left to the jurisdiction of the Tribunal.

4. There are strict auditing requirements for your appointed administrator. Your appointed administrator must lodge with VCAT an account of the dealings and transactions relating to financial matters specified in the administration order during the previous 12 months.

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Unfortunately, we don’t have a crystal ball and have no way of knowing what tomorrow holds. Making an Enduring Power of Attorney is a way you can ensure that upon your loss of capacity, your personal and financial decisions are made by someone you know and trust.

At Wakefield Lawyers, making an Enduring Power of Attorney is not a ‘one size fits all’ approach – our Estates Team ensures that your document is tailored to your needs and particular circumstances. If you would like to make an Enduring Power of Attorney or would like to discuss this article further, please contact our office on 03 5623 5166 or book an appointment online here.