Planning for the Future: The importance of a Power of Attorney
Generally speaking, Australians understand the importance of insurance. From health insurance to home insurance, we have a fairly good idea of why we need to protect ourselves and our assets in case of a catastrophic event or 'disaster'. However, when tragedy strikes in terms of their health, many people are left wishing that they had taken the necessary precautions to protect themselves from financial disaster.
An enduring Power of Attorney is the "insurance policy" that most people get wrong – it's the document used to appoint someone else (called an attorney) to legally deal with your money, bank accounts and other assets if you become unable to manage your affairs by yourself.
Who needs a Power of Attorney?
Most importantly, it's not just elderly people who need to think about appointing a Power of Attorney. With dementia rates on the rise, this condition is a particularly compelling reason to plan ahead but the capacity to manage your own financial affairs can also be lost by much younger people through car accidents, workplace incidents, ill health, psychiatric illnesses, during medical operations, after a stroke or being in a coma.
The power in the document in most cases starts when you lose capacity – either temporarily or permanently - and then ceases when you die and your Will comes into effect.
Who should you appoint?
The critical factor here is that it needs to be someone you trust. Spouses and partners usually appoint each other and, as a backup, one or more of their children. The Power of Attorney can also be set up so the attorneys can make decisions jointly or independent of each other.
Other options include the appointment of a professional such as a solicitor or accountant or a professional person jointly with a family member or friend - the more instructions and clarification of your wishes you can provide to the designated person the better.
The powers of an attorney
In New South Wales, an attorney's powers stop at financial and legal decisions – for example, spending money to pay for medical and household bills or buying and selling assets on your behalf.
When it comes to lifestyle and personal matters, like whether to remain in your own home with help or move into residential care, and which doctors to use, you may need to appoint what is called an enduring guardian.
If someone has not appointed a Power of Attorney or enduring guardian and loses capacity, and there are decisions to be made around their finances and their health, then an application has to be made to the relevant state tribunal to appoint a guardian. This process can be time-consuming and there is a risk that the Tribunal may not take into account the wishes of the individual who has lost capacity. This may in turn lead to family disputes and problems.
For more information on Powers of Attorney and how best to protect your financial future - or that of a loved one - contact Nicolas Moore at CDQ today on ph: 02 8566 2400.
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