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POWER OF ATTORNEY

A Power of Attorney is an important and powerful tool in planning for one’s future.

What is a Power of Attorney?

A power of attorney is a legal document made by one person, called the "principal" that gives power to another person, known as "the attorney", to deal with the principal’s money and assets. For example, it gives the attorney the authority to buy and sell real estate, shares and other assets for the principal, to operate the principal’s bank accounts, and in some cases, to spend the principal’s money on behalf of the principal and to confer benefits on the attorney or other specified third parties. It becomes void on the death of the principal.

There are two types of powers of attorney – a General Power of Attorney and an Enduring Power of Attorney.

General Power of Attorney

A General Power of Attorney is a useful planning tool for one’s future.

By appointing an attorney, there will be someone who is legally authorised to do things for you when the need arises, such as operating a bank account, dealing with property or paying general bills on your behalf.

It is important to note that a General Power of Attorney becomes invalid upon the death of the Principal or when the Principal loses the mental capacity to make their own decisions.

Enduring Power of Attorney

An Enduring Power of Attorney continues to operate after the principal has lost the mental capacity to make their own decisions. An enduring power of attorney may be made at the same time as a general power of attorney, however there are some additional requirements, including:

it must say that the principal wants it to continue after he or she has lost mental capacity;
the attorney has to sign the form to show that he or she consents to act; and
the form must be signed by a prescribed witness, who must also sign a certificate on the form stating that he or she explained the enduring power of attorney to the principal and that the principal appeared to understand it.

An enduring power of attorney can be useful because you may become unable to look after things yourself at some stage in the future. This could be due to physical ailments, loss of mental capacity or something unforeseen, such as a motor vehicle accident. Making an enduring power of attorney is a cheap, easy and practical way to prepare for the future. What are my attorney’s obligations?

An attorney has a legal obligation to always act in the best interests of the principal. Unless the attorney is expressly authorised, the attorney cannot gain a benefit from being an attorney or use the principal’s money and assets for the attorney or anyone else. The attorney must keep their own money and assets separate from the money and assets of the principal (unless they are joint owners of property or a bank account) and keep proper accounts and records of how the attorney handles the affairs of the principal. The Public Trustee or Guardianship Tribunal, or anyone interested in the welfare of the principal, can require the attorney to produce these accounts and records.

Case Study

Jan agrees to sell her property in Newcastle to Bob and Nina. Three weeks before settlement of the sale, she receives news that her mother is gravely ill and she must immediately leave for England to see her. Jan goes to see her solicitor the next morning and is advised to give a general power of attorney to her sister, Maria, to execute all documents connected with the sale on her behalf. The solicitor includes a condition in the power of attorney that Maria can execute any and all documents relating to the discharge of Jan’s mortgage in favour of the Commonwealth Bank over the property in Newcastle and effect the transfer of her interest in the property to Bob and Nina provided that Maria shall not be entitled to exercise any powers under the Power of Attorney without Jan’s prior approval.

This page is not intended to constitute or to be a substitute for legal advice. If you wish to obtain specific advice with regard to your situation please contact our friendly staff on (02) 9662 7388 or email questions to reception@kydonsegal.com.au.