Power of Attorney: What is it and How do I Set One Up?

Power of Attorney: What is it and How do I Set One Up? In this article we cover:

• What is a Power of Attorney?
• What is an Enduring Power of Attorney?
• What are the benefits of a Power of Attorney?
• What are the downsides of a Power of Attorney?
• What to do before setting up a POA
• How do I set up a Power of Attorney?

What is a Power of Attorney?

There are two types of Power of Attorney: An Ordinary Power of Attorney (POA) and an Enduring Power of Attorney (EPA).

An Ordinary Power of Attorney is a legal document that authorises another person to make decisions or act on your behalf in specific situations.

This document is only effective while the person granting the authority still has mental capacity. It enables the appointed individual, known as the attorney, to, for instance, sign documents on behalf of the person granting the authority if they are abroad or unable to do so themselves due to physical limitations.

These documents are particularly handy for company directors, as they allow someone else to sign on behalf of the director when they’re overseas. This flexibility can be especially beneficial for sole traders.

What is an Enduring Power of Attorney?

Commonly confused with a Power of Attorney, an Enduring Power of Attorney remains valid even if you become mentally incapacitated. In such cases, your attorney’s decisions take effect as if you made them yourself. An Enduring Power of Attorney can be split into two categories:

• EPA in relation to personal care and welfare
• EPA in relation to property

EPA in relation to personal care and welfare

Your Enduring Power of Attorney for personal care and welfare empowers the attorney you’ve chosen (known as the donor) to make decisions regarding your personal care and welfare if you ever become mentally incapacitated. You’re only allowed to appoint one personal care and welfare attorney, but you can select a second attorney to take over if the initial attorney’s role ends. You have the option to appoint more than one successor attorney if you wish.

EPA in relation to property

Enduring Powers of Attorney for property allow you to choose someone to manage your property affairs, such as bank accounts and investments. It can start right away or only when you can’t make decisions for yourself. Starting it right away can make things easier if your mental capacity changes.

What are the benefits of a Power of Attorney?

A Power of Attorney (POA) or Enduring Power of Attorney (EPA) offer several benefits, including:

1. Decision-making support

A POA allows you to appoint someone you trust to make decisions on your behalf if you become unable to do so due to illness, injury, or absence.

Knowing that you have designated someone to manage your affairs can provide peace of mind, especially in situations where you may be incapacitated or unable to act on your own behalf.

2. Tailored decision-making

You can customise the powers granted in the POA document, allowing you to specify the extent of authority your attorney-in-fact (the person you appoint) will have, depending on your specific needs and circumstances.

3. Legal compliance

Having a valid POA ensures that your affairs are managed according to your wishes and in compliance with legal requirements, minimising the risk of disputes or challenges.

What are the downsides of a Power of Attorney?

While a Power of Attorney (POA)  offers many benefits, there are also potential downsides to consider:

1. Potential for abuse

Granting someone else authority over your affairs comes with the risk of abuse or misuse of power, especially if the appointed Attorney does not act in your best interests.

With a POA or EPA in place, you may lose some control over your affairs, as decisions are made by your attorney according to the powers granted in the document.

2. Conflicts and disputes

Family members or other interested parties may disagree with decisions made by your Attorney, leading to conflicts or disputes that can strain relationships and require legal intervention to resolve.

3. Financial risks

Entrusting someone else with control over your finances through a POA or EPA can expose you to financial risks, such as mismanagement, fraud, or loss of assets.

If disputes or challenges arise regarding the validity or execution of the POA/EPA, you may incur legal costs to resolve these issues through litigation or mediation.

What to do before setting up a POA

Before you start the process of setting up an POA or EPA, make sure you carefully consider who you want to choose for the role. People often choose a family member or close friend as an attorney, but ideally it should be someone who:

• Knows you well
• You trust to make decisions for you
• Is willing and able to take on the responsibility of being an attorney

They must also:

• Be at least 20 years old
• Not be bankrupt
• Not be subject to any personal order or property order

How do I set up a Power of Attorney?

Setting up an Ordinary POA is fairly simple.

1. Complete the POA form. These can often be found online
2. Look over the document to ensure that you understand and agree with the powers you have given to your Attorney
3. Speak to your Attorney to ensure they understand their responsibilities and limitations
4. Sign your Power of Attorney

If you’ve made an ordinary Power of Attorney, you’ll need to gather a witness and sign the relevant page in front of a Notary Public. Your witness also needs to sign the page in front of the Notary. The Notary will then acknowledge and sign the document. Your Attorney needs to accept their appointment by signing the “Acceptance of Appointment” section of the document.

Remember, an Ordinary Power of Attorney remains valid only while the person granting it is mentally capable. If the person becomes mentally incompetent, the Ordinary Power of Attorney becomes invalid.

How do I set up an Enduring Power of Attorney?

You can also choose a trustee corporation (such as Public Trust) to be an attorney for your property EPA (but not for your personal care and welfare EPA).

You can create an enduring power of attorney with a lawyer or trustee corporation without needing to involve the Family Court initially. However, if any issues arise later, the Family Court may step in to help resolve them.

You can find the necessary paperwork on the Office for Seniors website or from lawyers and trustee companies.

Witnessing the document

Your signature must be witnessed by one of the following:

• A lawyer
• An authorised officer of a trustee corporation
• A registered legal executive who has at least 12 months’ experience and is employed by a lawyer

You need to attach a “certificate of witness” to your signature on the form. This certificate confirms that specific details were explained to you before you signed, that the witness is not connected to the attorney, and that the witness has no reason to believe you lack mental capacity.

Fees

Some law firms might prepare your EPA for free if you’re already working with them on other matters, but usually, there’s a fee. You can save time and money by doing some groundwork before seeking advice.

If you use a trustee company, costs start around $150 to $290. Lawyers typically charge hourly or task-based rates.

Before proceeding, ask about the fees. Lawyers must tell you upfront about their charges. Some community law centers may also help for a small fee. Check with your nearest center.

About the author of this page

This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.