Enduring Powers of Attorney in NSW
What is a Power of Attorney?
A power of attorney is a document empowering a person (or persons)(“the attorney”) to act on behalf of another person (“the principal”) with respect to the principal’s assets, debts and financial affairs.
Powers of attorney can be:
General – the attorney is able to do nearly all things the principal could legally do, though this power of attorney will expire if the principal loses mental capacity.
Limited – the power is limited by, for example, time or limited to a specific act.
Enduring – the power remains effective even after the principal has lost mental capacity. It will remain in force until death or until the power is validly revoked.
The rest of this fact sheet deals with Enduring Powers of Attorney.
Do I need an Enduring Power of Attorney?
If you own assets and lose mental capacity, someone will probably need to be appointed to look after your affairs.
If you have not granted an Enduring Power of Attorney to the person of your choice, someone (eg. your spouse, son or daughter) may need to apply to the Supreme Court or NSW Civil and Administrative Tribunal to be appointed. An officer from the NSW Trustee and Guardian, a government body, may also need to be involved in the management of your affairs.
Even if you have not lost mental capacity, you may need someone to access your bank account or conduct a transaction for you if, for example, you are overseas, in hospital or just find it difficult to get to banks, government agencies, real estate agents and do things yourself.
If you appoint an attorney, you do not lose your own rights to manage your affairs, while you still have the mental capacity to do so. You can revoke the power of attorney at any time you have the mental capacity to do so.
Who should I appoint to be my Attorney?
Appointing someone as your attorney allows that person to step into your shoes and do almost anything you could do in relation to your assets located in NSW. For example, your attorney could access your bank accounts, sell your shares and sell or mortgage your real estate. It is therefore an extremely powerful document.
A power of attorney should only be given to someone you trust completely. They are extremely useful documents in the right hands but very dangerous in the wrong hands. Your attorney can be any person over the age of 18 years who you trust to manage your affairs. If you are concerned that your family or friends may not be appropriate for the role you can also appoint either the NSW Trustee & Guardian, a trustee company or a solicitor to act as your attorney (though they will likely charge a fee for acting in this capacity).
You should consider appointing someone who would be your first choice to act as your Attorney and someone else as your second choice. You might also consider appointing more than one person to act as your attorney, either jointly (i.e. they must act together) or jointly and severally (i.e. they can act together but can also act independently of each other). Bear in mind that if you appoint two or more people to act jointly, this will slow down the administration of your affairs as each and every person will need to sign documents before any act can be done in relation to your affairs.
Recent amendments to the Power of Attorney Act 2003 now allow for a power of attorney which appoints two people or more to act jointly, to continue where the office of one of the attorneys becomes vacant (which can occur if an attorney dies, resigns, becomes bankrupt, loses mental capacity or their authority to act is revoked), provided at least one attorney (or a substituted attorney) remains. However, you will need to elect whether you would like the power of attorney to continue in such circumstances.
Should the Power of Attorney be operative immediately, or only once I have lost capacity to manage my own affairs?
We recommend that in most cases, the appointment of your attorney should be operative immediately and not only in the event that you lose mental capacity. This means that your attorneys can act for you if you are unable to manage your affairs for reasons other than mental incapacity. For example, if you are overseas or physically (but not mentally) incapacitated in hospital. It also means that there is no built in restriction on the powers of your attorney and that your attorney may act as your attorney even if you still have the capacity to manage your own affairs. If you don’t trust your attorney to only act in accordance with your wishes, when you are able your wishes to express them, then they are probably not an appropriate person to appoint as your attorney.
If you only allow your attorney to act when you have lost mental capacity, then your attorney will normally be required to prove that you are mentally incapacitated before they will have the power to act on your behalf. This may happen at a time when you require financial assistance quickly. Although including such a restriction provides a measure of protection, it has the potential to cause great inconvenience in the management of your affairs. There is also no guarantee that any person seeking to work with an attorney will accept that the trigger condition (e.g. loss of capacity) has occurred. For example, if a Bank sees a condition or restriction in a Power of Attorney, the Bank may not accept the Power of Attorney or may require an exhaustive examination of medical reports and other documents, by their legal and other staff, before it will accept that the attorney has the power to operate your accounts or otherwise deal with your assets.
An enduring power of attorney will commence once the attorney has accepted their appointment by signing an acceptance of the appointment (though see below as to the specific requirements for the execution of an enduring power of attorney).
Do I lose my rights once the power of attorney is in force?
No. You can still deal with your assets and finances once the power of attorney is in force provided you still have the mental capacity to do so. If the attorney has doubts about your capacity they may request you to attend a medical practitioner to obtain a written opinion from a qualified specialist.
Should I include any restrictions on my second choice of Attorney, to ensure they can only act as my Attorney if my first choice of Attorney is unable or unwilling to act?
Again, if your second choice of Attorney has to prove that your first choice of Attorney is unable or unwilling to act or if any other restrictions are placed on your Attorney, this has the potential to cause great inconvenience and delays in the management of your affairs.
We therefore suggest that you appoint your second choice of Attorney in a separate document and that you leave a Memorandum of Wishes with your documents, indicating that you would only like your second choice of Attorney to act if your first choice cannot. This is not a binding document, but it does provide a method of making your wishes known.
Should I allow my Attorney to benefit others?
Your Attorney has a duty to only exercise their powers for your benefit and not for their own.
However, you can provide in your power of attorney document that your attorney can make gifts to other people or organisations (eg. charities) of the type you would normally make and of a value that is reasonable in all the circumstances. Examples of these types of gifts include birthday presents, wedding presents and charitable donations.
You can also empower your attorneys to pay the reasonable living and medical expenses of a particular person (including your attorneys themselves). You might like your Attorney to be able to do this for your spouse, children and/or grandchildren.
Alternatively, you might like to empower your Attorney to provide unlimited benefits to your spouse and possibly also to your children and/or grandchildren.
Should I disclose my will to my Attorney?
It is helpful for an Attorney to know about the contents of your will, particularly if you have left a specific asset to someone in your will. Your attorney will then know about the benefit left to that person and will be able to take that into account when managing your affairs.
What are the duties of an Attorney?
The duties of an Attorney are to:
- Act in the best interests of their Principal, keeping the Principal’s assets separate from their own;
- Not to confer benefits on themselves or on any one else unless they are expressly authorised to do so;
- Keep an adequate accounts and records of any dealings with the Principal’s assets, that must be made available upon a request from the NSW Trustee or anyone interested in your wellbeing;
- Avoid abusing his or her position as Attorney including by making a profit or causing a conflict between their duty to the Principal and their own interests; and
- Ensure they always act honestly in all matters concerning your legal and financial affairs.
The prescribed enduring power of attorney form also expressly states that “failure to do any of the above may incur civil and/or criminal penalties,” and that the attorney may be liable to compensate you for any losses they have caused.
Will my Attorney be able to manage my assets in places other than NSW?
Some other jurisdictions in Australia recognise Powers of Attorney made in NSW so if you have assets elsewhere you should check with a solicitor in that jurisdiction to see if your Power of Attorney made in NSW will be recognised in that jurisdiction.
How do I make an Enduring Power of Attorney?
We recommend that you see a solicitor to prepare an Enduring Power of Attorney. In any event, your solicitor (or another prescribed person) will need to sign a certificate that accompanies the document, to make the appointment of your attorney effective. That certificate is that the solicitor explained the effect of the power of attorney to you and that he or she witnessed your execution of the document. Your Attorney must also sign the document, to accept his or her appointment as your attorney, to make the appointment effective.
Should I register my power of Attorney?
It is not necessary to register a power of attorney unless your Attorney needs to deal with your real estate. However, registering a power of attorney is one way of keeping a public record of the document. Bear in mind this will make the document available for anyone to access if they are searching for this record and there is a fee for registering the document.
How do I cancel an Enduring Power of Attorney?
You can revoke (that is, cancel) an Enduring Power of Attorney at any time whilst you have the capacity to do so.
There is no prescribed form for revoking an Enduring Power of Attorney, which means a letter to the attorney can suffice. However, as an attorney is entitled to continue to act as your attorney, unless he or she has been given notice of the revocation of his or her appointment as your attorney, it is prudent to serve a notice revoking the power of attorney on the attorney and to keep evidence of the service of the notice on the attorney. Any third parties with whom the attorney might deal on your behalf, should also be given notice of the revocation of the power of attorney. If you have registered your power of attorney it is also prudent to register any document purporting to revoke the power of attorney.