The Importance of a Power of Attorney – What You Need To Know

Planning for the future can be daunting, especially when it’s a future without you in it. However, it’s a key aspect of protecting your family’s financial future and putting a power of attorney (POA) in place is a must. A POA gives someone else the power to make decisions on your behalf if you are unable to.

A POA can cover a range of decisions, including personal, medical, legal, and financial and that all depends on the type of POA you put in place. That’s something you should discuss with your Will and Estate lawyer.

Why is Having a Power of Attorney Important?

Nobody plans a life-changing injury, illness, or mental incapacity, but accidents happen all the time, and life can change in a second. If you are incapacitated, a POA ensures that there’s someone there to manage your affairs and make pertinent decisions about your medical care, personal life, and financial health.

If you don’t have a POA in place, certain issues will end up in court. Whether there’s a need for a guardian to be appointed or to seek an administration court, a lack of POA is a costly, time-consuming problem for your loved ones. Ultimately, without a POA, someone you don’t know or trust could be in charge of making decisions on your behalf. A POA ensures your preferred decision-maker is the one calling the shots.

Types of Power of Attorney in Australia

There are three main types of power of attorney in Australia.

General

A General POA gives the elected person the authority to make legal and financial decisions on your behalf. This can be for a set period or until it’s removed. Usually, this type of POA is put in place when someone is temporarily incapacitated or unavailable.

For example, if you were going abroad for an extended trip, you may want someone to manage your finances.

Enduring

An Enduring POA is in place and becomes valid when the person is incapacitated or incapable. This is a particularly important POA when you’re working with a Will & Estate Lawyer to plan your estate. It’s one of the most effective ways to protect your interests if you are dealing with long-term illness.

For example, an Enduring POA can handle decisions for someone with dementia.

Medical

A Medical POA gives someone the power to make medical decisions for someone else if the person is unable to do so. A Medical POA can be a standalone document, but it can also form part of the Enduring POA.

For example, you may want to choose someone to make a medical decision about continued care if you are in a serious accident or gravely ill.

Who Can Be Appointed as Your Attorney?

Anyone over the age of 18 who is deemed to be capable of managing the relevant responsibilities and is trusted to make the best decisions on your behalf can serve as your power of attorney.

The key is to choose someone good under pressure, and you can trust them to make decisions you would make in any given situation. You are handing over significant control, so it has to be someone you trust to honour your wishes. Many people choose a lawyer or financial expert, but it can be a trusted family member or friend.

When You Should Consider Creating a Power of Attorney

The best time to create a power of attorney is now, when you are mentally capable; it isn’t valid otherwise. You can’t wait until you’re incapacitated to make decisions like this, and failure to put protections in place will limit the options down the line.

In estate planning, a clear Will is a must to avoid family members contesting a Will or challenging a Will, and a POA is just as important. A clear Will prevents a Will dispute, and a POA ensures there is someone who can step in and make important decisions when you are no longer able to.

Whether you’re getting older or experiencing poor health, the sooner you create a POA, the better. It’s also wise to have a POA in place before you go into the hospital for a major medical procedure.

How to Set Up A Power of Attorney

Step one is to choose the right type of power of attorney, and while you can decide on your own, you might want to discuss your options with your lawyer. Which brings us to step two – finding a trusted attorney to hand power to. Who is up to the challenge and trustworthy enough for that level of power?

Step three is completing the POA document, and this must be completed by hand and signed with witnesses present. Always speak to a lawyer about this part of the proceedings because you want to ensure your POA is legal and valid.

Finally, make sure that all the relevant parties are informed of their role and provide copies of the paperwork to the relevant people. This is usually provided to medical providers, banks, and relevant family members. Make sure you review your POA regularly if you go through a significant life change.

What Happens If You Don’t Have a Power of Attorney

If you don’t have a POA, the court will assign a guardian or administrator to make decisions on your behalf if you are incapacitated. It means your family has to apply for that role, which can be expensive and time-consuming. In the meantime, a government-appointed person will make those decisions.

Legal Considerations and Precautions

If you change your mind about the POA you’ve chosen, you can revoke the status, provided you’re mentally capable. It’s important to remember that there are legal safeguards in place for POAs; the POA has a fiduciary duty and must act in your best interest. Failure to do so can have serious legal consequences.

Final Thoughts

A Power of Attorney is a must, and if you want advice about whether it’s right for you or want help to create a POA, AJB Stevens can help. Alternatively, if a Power of Attorney has read your loved one’s Will and you don’t believe you have been fairly treated, then AJB Stevens can help.