If you were to become sick or injured and could no longer make sound decisions, it’s best to appoint someone you trust to help make financial and other life decisions on your behalf.
When it comes to legal documents and processes there are so many different terms used, and for those of us without a law degree, it’s easy to get confused.
For example, do you know what a “power of attorney” is? If you don’t, do not worry. Many Aussies are unaware of what that term means, but fortunately for you, that’s about to change.
Power of attorney means a person (the attorney) that has been appointed to act on behalf of another person (the principal or donor) who has given the attorney the power to do so. In other words, the principal provides the attorney with permission to make decisions for them.
Do you understand what “power of attorney” now means? If so, that’s good. If not, no stress, we’re going to delve a little deeper into the subject of power of attorney.
The Different Types of Power of Attorney
There isn’t only a single type of power of attorney that people can go to for their decision-making support. Instead, several types are available, helping to meet any specific needs and requirements.
While there are a few specific meanings of guardianship, when it comes to power of attorney, guardianship is the appointment of a person or an organisation to become the guardian who makes decisions on behalf of a disabled adult.
The guardian is typically appointed by a board or tribunal to make lifestyle decisions for an adult who has a disability that affects their decision-making skills.
When it comes to the kind of decisions a guardian will specifically make, these decisions will revolve around things like work arrangements, medical treatments, access to services, and the like.
Like guardianship, an administration happens when a person becomes an administrator appointed by a tribunal for a person with a disability. However, the decisions that an administrator makes aren’t the same as a guardian would make.
With administration, the decisions being dealt with revolve around financial and legal decisions that the disabled individual cannot make.
General and Enduring Power of Attorney
General power of attorney is a type of power given to an attorney that allows them to make financial and legal decisions for the principal until that power is changed, cancelled, or limits specified. Meanwhile, if the principal loses their capacity or passes away, the power can also still be changed.
On the other hand, enduring power of attorney revolves around a specific date that the power is activated and the responsibilities given to the attorney.
Such power is generally written in a document, noting the specified date in which the power comes into play. Also, the document can still note when the power will come into effect depending on the principal’s capacity or medical evidence.
Who Needs a Power of Attorney?
As mentioned a few times already, a power of attorney is generally relevant for individuals with some form of disability that affects their autonomy.
As to what dictates a disabled person, the term disability means anyone that has a brain injury, physical disability, mental disorder, intellectual impairment, or form of dementia.
Essentially, any issue that affects a person’s autonomy negatively may be considered a disability. This is because the position for decision-making falls on complete autonomy or independence.
How to Appoint a Power of Attorney
Typically, it is recommended that anyone over the age of 18 should consider implementing enduring power of attorney.
This is because, past this age, anything can happen to their ability to make a decision, and the enduring power of attorney will ensure that if anything happens, an attorney will be at the ready.
That being said, when it comes to appointing an attorney, there are a few things the principal must consider to ensure they pick the right individual.
- You should pick someone you fully trust to become their attorney.
- The attorney you work with must have excellent money-management skills for financial decision-making.
- You should have complete confidence that the attorney will only act in your best interests.
- The attorney that’s being picked should not have any health or personal problems, such as drug addictions, that will affect their ability to carry out any decision.
Keep in mind that an attorney doesn’t have to be a person with a legal background. It can be a friend or even a family member, being mindful not to assume that a friend or a family member has the knowledge or skills needed to carry out the role properly.
As such, working with real professionals to carry out the role is often recommended to ensure all the considerations above are thoroughly met.
As for the attorney that’s being picked, there are a few considerations they must also make.
For example, the attorney must realise that their powers should only be exercised in the principal’s interest.
Also, the attorney must avoid any conflicts of interest and ensure that their assets are separate from the principal’s. Finally, when dealing with any transactions, all dealings should be recorded accurately.
A power of attorney is essential for many reasons.
For a disabled individual, a power of attorney gives the attorney the ability to make crucial decisions such as financial decisions to ensure the principal’s wishes are met.
If you do not have an enduring power of attorney set up yet in your Will, or do not have a professional at the ready to take care of your finances should anything happen to you, take action today.
You never know when your decision-making skills could be compromised, and you never know when you may need help ensuring your financial decisions are made in your best interests.
If you are looking for a professional to help address your power of attorney needs in Australia, reach out to us today.
At My Money Sorted we provide expert budgeting tips, tailored insights, and helpful tools to help you make the best money moves, no matter your stage of life. We cover superannuation, financial planning, investments, personal loans, insurance, and home loans. Sign up today for news and insights to help you get your money sorted!