Enduring Powers of Attorney and Enduring Guardianship

What are they and why are they important?

Enduring Powers of Attorney and Appointment of Enduring Guardian are estate planning documents that allow you to appoint trusted people to manage your affairs if you lose mental competency or “capacity”.

A Power of Attorney appoints a person, commonly a family member or friend, to manage financial matters, property and legal affairs.  The person granted these powers is known as an “attorney”.

An enduring guardianship appoints a person, known as a guardian, to make non-financial “lifestyle” decisions.

Powers of Attorney are in two broad categories:

General Power of Attorney – these usually create an immediate and potentially unlimited power that ceases upon incapacity.  Because of these extensive powers, risk of financial abuse or fraud arise. In some instances, the powers can be confined to a specific purpose, such as completing the purchase of a property if you are overseas or unavailable.

Enduring Power of Attorney – these can operate when you cease to have “capacity” to make your own decisions and manage your own affairs. At that point, the person nominated as your attorney gains powers to manage those matters specified within the Enduring Power of Attorney. Usually, medical evidence of the loss of capacity is required before an Enduring Power of Attorney becomes operative.

Importantly, an Enduring Power of Attorney must be prepared before a person loses capacity, as it is a legal requirement that the nature and extent of the powers being given to an attorney are understood before the powers are granted. If someone has already lost capacity, the New South Wales Civil and Administrative Tribunal (NCAT) can appoint a guardian. This can be a complicated process.

Appointment of Enduring Guardian

An Appointment of Enduring Guardian allows a designated person appointed as “guardian” to make lifestyle and health decisions. Unlike an Enduring Power of Attorney, the powers under enduring guardianship apply to non-financial decisions such as those relating to accommodation, domestic assistance and support, and medical treatment.

An Appointment of Enduring Guardian only takes effect when the person loses “capacity” to make their own decisions and manage their own affairs. Similarly to an Enduring Power of Attorney, medical evidence of the loss of capacity is usually required before an Enduring Guardianship document becomes operative.

Both an Enduring Power of Attorney and an Appointment of Enduring Guardian cease to be operative on death, and at that point the directions within a Will become operative.

Why get an Enduring Power of attorney or Appointment of Enduring Guardian?

An Enduring Power of Attorney or Appointment of Enduring Guardian can reduce the practical difficulties associated with managing the affairs of an (often elderly) family member who no longer has capacity.  Further, these documents can alleviate some of the risks of financial abuse of a person no longer capable of managing their own affairs.

Many superannuation funds and financial planners regard an Enduring Power of Attorney and Appointment of Enduring Guardian as an essential estate planning document and often recommend their preparation.

How are they prepared?

The preparation of Enduring Power of Attorney and Appointment of Enduring Guardian documents requires care, as they grant potentially significant legal powers. A person seeking to give power must be at least 18 years of age and have capacity to understand the nature and scope of the powers they are granting. There are a series of legal formalities when advising and signing these documents that serve as safeguards.  Accordingly, these documents are prepared by a lawyer.

Risks associated with Enduring Power of Attorney and Appointment of Enduring Guardian

The requirement that the powers only operate once capacity is lost provides significant protection against the misuse of the powers sometimes associated with powers of attorney and guardianship.  Revocation of an enduring power of attorney after incapacity is problematic, and accordingly it is possible that someone granted these powers can misuse money or make decisions against the best interests of the person incapacitated.

The effectiveness of an Enduring Power of Attorney and Appointment of Enduring Guardian to serve their intended purpose is largely contingent upon the trustworthiness, competence and honesty of the person appointed the Power of Attorney and Guardian.

Costs of Enduring Power of Attorney and Appointment of Enduring Guardian

Commercial rates for preparing Enduring Power of Attorney and Appointment of Enduring Guardian documents vary. It is usually presumed that the Public Trustee provides the most cost-effective method of preparing an Enduring Power of Attorney and Enduring Guardianship. Their rates are generally considerably less than private law firms.

Carroll and O’Dea have made these documents available at a significantly discounted rate for USU members. Our current fee rates are comparable with the Public Trustee.