Why you should use a solicitor to prepare an Enduring Power of Attorney

What is an Enduring Power of Attorney?

An Enduring Power of Attorney is a legal document that allows you to appoint another person to make financial and personal decisions on your behalf, particularly in situations where you may no longer have the capacity to make decisions yourself.

As this document directly impacts your future care and financial matters, it is essential that it is correctly prepared in accordance with legal requirements.

In our experience, we frequently see documents that have not been completed correctly, are not properly executed, are not in the correct format, or which are simply not the right document for the intended purpose.

While a standard government regulation form is available to the public to complete themselves, certain complexities within the document maybe difficult for a layperson to fully comprehend and address. Engaging an experienced estate planning lawyer can help ensure your Enduring Power of Attorney is completed properly and tailored to your specific needs.

This might also include additional powers that are not automatically provided for in a 'standard' Enduring Power of Attorney.

Key Terminology

• Principal: The person creating the Enduring Power of Attorney.
• Attorney: the person (s) appointed to act on behalf of the Principal.

Appointing an Attorney

You have the option to appoint more than one attorney. If you choose multiple attorneys, they can act in one of the following ways:

Joint Attorneys

If attorneys are appointed jointly, they must make all decisions together. Relevant institutions (such as banks, Centrelink, or aged-care facilities) will require all attorneys to sign before any action can betaken on behalf of the Principal.

Joint and Several Attorneys

This arrangement allows any one of the attorneys to make decisions independently, without needing the agreement of the others. This can be beneficial in cases where one attorney is unavailable due to illness or travel.

Majority Attorneys

When attorneys are appointed on a majority basis, more than half of them must agree before making a decision on behalf of the Principal.

When does the Powe of Attorney take effect?

As the Principal, you can decide when your Enduring Power of Attorney becomes active.

The Enduring Power of Attorney can take effect immediately upon you signing the document, meaning that your attorney can commence making decisions on your behalf when they deem it necessary. However, whilst you still retain decision making capacity, your attorney cannot act against you wishes.

Alternatively, the Enduring Power of Attorney can specify that it takes effect only once you lose decision-making capacity. This will mean that institutions will require a letter from a doctor as proof of loss of capacity, before the attorney can act. This could cause delays if an urgent decision needs to be made. Furthermore, such an appointment could pose a challenge if you need your attorney to act because you are physically incapable(such as being in a hospital) but still retain mental capacity. The attorney would not have the legal authority to act in this situation.

Conflict Transactions

An attorney is legally required to act in the best interests of the Principal and cannot personally profit from their role. However, many people appoint their spouse as their attorney and, in such cases, financial decisions may naturally benefit both the Principal and their spouse.

For example, a spouse acting as an attorney may need to sell the Principal’s assets and transfer the proceeds to a jointly held bank account. Generally, this would not be allowed as an attorney must keep the Principal’s assets separate from their own. However, an Enduring Power of Attorney can include a clause allowing a spouse to enter into ‘conflict transactions,’ which would permit such actions.

Superannuation Considerations

A Binding Death Benefit Nomination (BDBN) directs superannuation funds on how to distribute your benefits after your passing. Since BDBNs often expire after a set period (typically three years), they need to be reviewed and renewed regularly.

There is some legal uncertainty as to whether an attorney can make or renew a BDBN on your behalf, unless specifically authorised in the Enduring Power of Attorney. It may therefore be beneficial for your Enduring Power of Attorney to explicitly grant your attorney the authority to make or renew a BDBN on your behalf if you become unable to do so yourself.

Taxation Considerations

If superannuation is paid to a non-dependent after death, such as to an adult child, it is usually subject to tax. A common tax strategy is to withdraw the superannuation before death, allowing it to become part of the general estate and be distributed tax-free to beneficiaries.

However, if you lose decision-making capacity before withdrawing the funds, you may be unable to implement this strategy. An Enduring Power of Attorney can be structured to authorise your attorney to withdraw superannuation in such circumstances, particularly if a doctor has indicated you are nearing the end of your life. It is crucial to seek financial and taxation advice such a decision is made.

Family Trusts and Private Companies

If you have a family trust or are a company director, additional considerations apply, as an attorney may not be able to make decisions on behalf of an incapacitated trustee or director. For more information on attorneys and their role in managing family trusts and businesses, refer to our article Family Business, Trusts and Superannuation.

Conclusion

An Enduring Power of Attorney is a vital document when planning for your future care and financial security. Given the legal complexities surrounding Enduring Powers of Attorney,  superannuation and taxation, consulting an experienced lawyer is highly advisable. A lawyer can tailor the document to suit your personal circumstances, ensuring all necessary provisions are included.

Seeking expert and independent legal advice is essential to ensure your Enduring Power of Attorney is correctly drafted and meets your specific needs.

How Sharrock Pitman Legal can assist

At Sharrock Pitman Legal, our Wills & Estates team led by an Accredited Wills& Estates Law Specialist can guide you through the process of making an Enduring Power of Attorney. Our Wills & Estates team has experience in complex estate planning including for blended families and family businesses.

Please do not hesitate to contact our Wills & Estates team on 1300 205 506 oremail willsandestates@sharrockpitman.com.au.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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