What is the difference between a Power of Attorney, an Enduring Power of Attorney and an Enduring Guardianship?

Posted on Mar 26, 2015 by Terry Morgan   |   Categories: Wills & Estates, Wills, Powers of Attorney & Enduring Guardianships

Alongside the community’s greater awareness of mental and degenerative illnesses and disabilities is the need to plan for such circumstances, according to estate planning lawyer TERRY MORGAN.

Some people believe a “living will” is the way to ensure that their welfare and wealth are dealt with in the manner they would like it to if ever they lose capacity to make their own decisions. However, Baker Love recommends our clients consider Enduring Power of Attorneys and Enduring Guardianships.

For many years, a Power of Attorney has been an indispensable estate planning document to allow your financial affairs to continue, relatively uninterrupted, in the event of your absence through illness, injury or travel. However, a general Power of Attorney has limitations: it does not extend to lifestyle decisions and may become invalid if you lose mental capacity.

 

What is a Power of Attorney?

A power of attorney is a legal document made by you that gives another person, known as your “attorney”, the authority to manage your assets and financial affairs in the event that you are unable to do so when the need arises (e.g. due to illness, as a result of an accident, or simply as a result of your absence). For example, your attorney may buy and sell real estate, shares and assets on your behalf, operate your bank accounts, and pay your bills.

Making a Power of Attorney does not mean that you will lose control of your financial affairs. It simply gives your attorney formal authority to manage your financial affairs according to your instructions.

Your Power of Attorney can be revoked at any time, provided you have the capacity to do so.

There are two types of Powers of Attorney – a general Power of Attorney and an Enduring Power of Attorney. The key distinction between the two is that:

  • your general Power of Attorney becomes invalid upon your death or when you lose the mental capacity to make your own decisions; whereas,• an Enduring Power of Attorney will continue to have effect during your lifetime even if you lose capacity to self-manage. It also becomes invalid upon your death, at which point the Executor named in your Will takes over the responsibility of administering your estate.
  • an Enduring Power of Attorney will continue to have effect during your lifetime even if you lose capacity to self-manage. It also becomes invalid upon your death, at which point the Executor named in your Will takes over the responsibility of administering your estate.

Baker Love recommends you appoint an Enduring Power of Attorney rather than a general Power of Attorney if you want them to have authority in the event that you lose capacity.

An Enduring Power of Attorney has some additional requirements, such as:1. it must state that you want it to continue after you lose mental capacity;

  1. it must state that you want it to continue after you lose mental capacity;
  2. your nominated attorney has to sign the form to show that he or she consents to act as your Enduring Power of Attorney (not required by a general Power of Attorney); and
  3. the document must be signed by a prescribed witness, who must also sign a certificate stating that he or she explained the enduring power of attorney to you and that you appeared to understand it.

 

What is an Enduring Guardianship?

A Power of Attorney only grants authority to your attorney to handle property and financial matters. It does not give someone the right to make decisions about your lifestyle, medical treatment or welfare.

Lifestyle decisions are covered by Enduring Guardianship: it allows you to legally appoint a decision-maker of your choice to make those lifestyle and health care decisions should you lose the capacity to make your own decisions.

The appointment of your Enduring Guardian only takes effect if you lose the capacity to make your own personal or lifestyle decisions.

It is limited in its powers and does not also give authority to someone to handle your financial affairs – this resides within an Enduring Power of Attorney.

Your Enduring Guardian does not need to be a family member. You cannot be sure that your loved ones will be available, recognised or willing, when called upon, to make decisions on your behalf, so you should consider appointing an Enduring Guardian from your family or trusted network in whom you have most confidence.

If you would like to discuss an Enduring Power of Attorney or Enduring Guardianship, please contact one of our Estate Planning team of lawyers on (02) 4944 3322.