Fact Sheet

Power of Attorney Issues

What is Power of Attorney?

A power of attorney is a legal document made by one person, who is called the ‘principal’ that allows another person to do things with the principal’s money, bank accounts, shares, real estate and other assets. This can include spending and managing the principal’s money, buying or selling shares for the principal or buying, selling, leasing or mortgaging the principal’s house or other real estate. The person who does these things for the principal is called the ‘attorney’. A principal is sometimes called the ‘donor’ and an attorney is sometimes called the ‘donee’.

A power of attorney only authorises an attorney to act in relation to financial matters. It does not allow the attorney to make personal (including medical) decisions for the principal. Anyone who wants another person to make personal decisions for them should appoint an enduring guardian under the Guardianship Act 1987.

There are two types of powers of attorney: General Power of Attorney (also called an ordinary power of attorney) and Enduring Power of Attorney.

General Power of Attorney

A general (or ordinary) power of attorney will terminate if the principal loses mental capacity. It can be useful for a short term appointment, for example if the principal is going overseas for a short period. To make an ordinary power of attorney the principal’s signature need only be witnessed by a person over the age of 18 (other than the attorney being appointed).

Enduring power of attorney

An enduring power of attorney is one which continues to operate after the principal has loss mental capacity. An enduring power of attorney can be made on the same form as an ordinary power of attorney. However, an enduring power of attorney has some additional requirements:

• It must say that the principal wants it to continue after they have lost mental capacity.
• The attorney has to sign the form to show that they consent to act. This can occur at the same time as the principal signs or at a later time. However, the enduring power of attorney will not begin to operate until the attorney has signed. (This is not required for an ordinary power of attorney).
• The principal’s signature must be witnessed by a special witness (called a ‘prescribed witness’).
• The prescribed witness must sign a certificate on the form stating that they explained the enduring power of attorney to the principal and that the principal appeared to understand it.

A ‘prescribed witness’ is:

• a solicitor, barrister, Registrar of a Local Court
• a licensed conveyancer, employee of the Public Trustee or employee of a trustee company who has completed an approved course of study.

Do I lose my rights?

Making someone your attorney does not mean that you lose your right to operate your bank account, deal with your real estate or affect any other rights that you have. You can continue to look after your money and property while you still have mental capacity to do so.

When should I make a power of attorney?

It is important to make a power of attorney before you need it. This is particularly true for enduring powers of attorney. Once you have lost mental capacity, you cannot make a power of attorney because for a power of attorney to be effective, you must be able to fully understand what you are signing. A power of attorney usually starts as soon as it is signed and given to the attorney. If, however, you do not want your attorney to start using the power of attorney straight away, you can state on the power of attorney form when you want it to start. If you do this, then making your power of attorney early does not mean that you are handing over control to your attorney straight away.

Relevant legislation

The Powers of Attorney Act 2003 is mainly aimed at remedying problems that currently exist in practice with enduring powers of attorney (EPOA) – especially misuse of such powers by unscrupulous attorneys.

Some of the concerns older people have regarding EPOAs are:

• An EPOA may be activated on a false representation of incapacity;
• An attorney will wrongly take a benefit for him or herself;
• An attorney will issue benefits to a third party without authorisation.

The Powers of Attorney Act 2003 attempts to address some of these issues and provides for a greater review of the EPOAs by the Guardianship Tribunal.

Things your Legal Practitioner should be aware of when preparing an EPOA

Be aware of the more complex regime for powers of attorney and specific statutory limitations on benefits to third parties, benefits to attorneys and gifts.

If necessary, analyse whether transactions confer such benefits. Advice may be needed as to whether the wording in powers of attorney adequately authorises a transaction.

Be aware that attorneys under enduring powers given by individuals must sign their acceptance before the power becomes operative.

Check the time of operation of the power.

Be aware of the requirements for obtaining proof of the power.

Be aware of the requirements for registration of powers of attorney authorising dealings in land.

To speak to someone about enduring powers of attorney either contact the Guardianship Tribunal toll free on 1800 463928 or contact a solicitor at King Street Lawyers.

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