Power of Attorney

A Power of Attorney is an important and powerful legal document enabling the Attorney to deal with the financial affairs of the Principal of the Power of Attorney during his/her lifetime. Many people prepare a Will but do not give the same consideration to appointing an Attorney until it is too late.

• a Power of Attorney, or POA, is as important for life planning as making a Will
• it is a form of authorisation from a person to a third party to act on their behalf
• in Legal speak, the person giving the Power of Attorney is called the Principal or the Donor
• the person receiving and being empowered by the instrument is called the Attorney
• the document or instrument granting the power and empowering the nominated Attorney is called a Power of Attorney
• the Power of Attorney ceases to operate on the death of the Principal orDonor of the Power of Attorney
• appointing an Attorney gives your Attorney the legal authority to look after your financial affairs on your behalf
• it gives the Attorney the authority to buy and sell real estate, shares and other assets for the Principal, to operate the Principal’s bank accounts, to spend the Principal’s money on behalf of the Principal and to exercise many other powers
• a Power of Attorney cannot be used for health or lifestyle decisions. The Principal should appoint an enduring guardian under the Guardianship Act 1987 if the Principal wants a particular person to make these decisions
• an Attorney must always act in the best interests of the Principal. Unless the Attorney is expressly authorised, the Attorney cannot gain a benefit from being an Attorney
• an Attorney should keep the Attorney’s own money and property separate from the Principal’s money and property, unless they are joint owners, or operate joint bank accounts. An Attorney should keep reasonable accounts and records about the Principal’s money and property
• if the Attorney is signing documents that affect real estate, the Power of Attorney must be registered at Land and Property Information NSW
• the Power of Attorney ceases to operate on the death of the Principal or Donor of the Power of Attorney

• having a Power of Attorney does not mean that you will lose control over 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

Powers of Attorney can be signed and put aside, and will only become operational in certain defined circumstances, such as if the Principal becomes sick and is unable to manage their affairs. A Power of Attorney can be given for a variety of reasons. For example:

• to protect your financial affairs in case you become unwell and are no longer able to manage. You can make an Enduring Power of Attorney which will continue to have effect if you lose your capacity to self-manage
• if you are planning an extended interstate or overseas trip – your Attorney can act on your behalf during your absence if needed. Imagine that you have lost all your possessions or your credit cards have been stolen. Your Attorney can move to rectify the problem
• where documents need to be signed, but the person is overseas, interstate, or otherwise unavailable.The Attorney is authorised to sign the documents
• the sale and/or purchase of assets, undertaking administrative tasks, executing contracts, finalising financial transactions, representations made in the course of running a business – all can be handled more easily when a Power of Attorney is available to sign documents
• it is particularly useful as people age, reducing stress about the possibility of becoming incapacitated or unable to manage your financial affairs in the future

• just as in the case of individuals, Companies need Powers of Attorney from time to time
• for example if the sole Director of a company is overseas when decisions or documents may need to be signed, a carefully crafted Power of Attorney document or instrument will capture the predicted requirement

• each State and Territory of Australia has its own form of Power of Attorney; it is best to have the correct form of Power of Attorney
• foreign Powers of Attorney also have their own form, requiring precise drafting and translation. They are usually required to be witnessed by a Public Notary or Notary Public
• historically, Public Notaries were originally appointed by the Archbishop of Canterbury of the United Kingdom to witness international and foreign documents, particularly in the Colonial days of Trade with the Americas and the Spice Road Countries, in trade and commerce

Criteria that determine whether a Power of Attorney will be valid include:

• the Principal or Donor (person issuing the POA) must have the capacity and right to act by him/herself in the matters that he/she has entrusted to the Attorney. In other words, if a person doesn’t understand the document, for example, is suffering from dementia or Alzheimer Disease,then that person does not have capacity and the Power of Attorney is invalid and of no effect
• the Attorney must not be prohibited from acting in the matters entrusted to him
• it must be possible for the Principal to delegate the matter that is the subject of the POA. For instance you cannot give a Power of Attorney over a house or property that you do not own
• a Power of Attorney relates to financial matters only. Lifestyle and health directives are dealt with in a separate document called an “Appointment of Guardian”
• a public notary must check the identity of the person granting the Power of Attorney, so that the person using and acting upon the POA knows it has been correctly granted
• sometimes the Power of Attorney must be notarised firstin the country of issue and subsequently at the Embassy together with a certified translation
• it is always recommended that the correct form of the Country or State be used with correct wording of a Power of Attorney

A Power of Attorney expires or is deemed ineffective in the following circumstances:

• upon the Principal advising the Attorney in writing that the Power of Attorney document is terminated, rescinded, revoked,cancelled or similar
• upon completion of the specified work
• upon expiry of the fixed period stated in the instrument of appointment
• upon death of the Principal
• upon loss of capacity of the Principal ( unless the appointment is by way of an enduring Power of Attorney
• upon death of the Attorney
• upon the legal disqualification of the Principal

• an Attorney has obligations under a Power of Attorney (POA) document and as such, agreeing to be an Attorney under a POA should not be taken lightly
• in exercising rights under a POA, an Attorney is obligated to exercise his/her rights in a prudent manner within the limits of the POA, in a manner beneficial to the Principal
• if an Attorney is unable to carry out the activities under a POA, the Attorney maybe able to delegate his/her powers to a third party, provided the Attorney is validly authorised to do so
• if an Attorney delegates the power to a third party, the Attorney will always remain responsible towards the Principal for any mistakes that may occur in delegating such powers. The Attorney must complete his/her obligations under the POA unless there is a justified and valid reason for him/her to resign as an Attorney
• an Attorney is free to resign from his/her obligations under a POA by providing notice to the Principal, however any work being undertaken under a POA by the Attorney must be continued in a manner not to cause risk to the Principal
• an Attorney may be liable for any damage sustained by a Principal arising out of the resignation of the Attorney at an inappropriate time or without justification, if the Attorney is being paid for his/her services

• an Enduring Power of Attorney operates or continues to operate if the Principal/Donor loses capacity
• unfortunately people suffer heart attacks, strokes, senile dementia, Alzheimers and other nasty and unpredictable disabilities. An enduring Power of Attorney continues to have full force and effect, even if the Principal or Donor of the Power suffers a disabling illness and is unable to manage their personal financial affairs
• a General Power of Attorney ceases to operate when the Principal or Donor or loses capacity
• the only way around the problem if a person suffers lack of capacity and cannot manage their personal financial affairs, and does not have an Enduring Power of Attorney, is to make an application to the Guardianship Board seeking the appointment of the Public Trustee or family member to undertake the duties of managing the affairs of the disabled person
• In matters involving significant administrative work, then the Public Trustee is the appropriate appointment

There are some important considerations when issuing a Power of Attorney. These include:

• why is a Power of Attorney (POA) being issued?
• what type of POA needs to be granted?
• can the Principal grant the POA?
• can the subject matter be lawfully dealt with through the POA?
• who will act as the Attorney?
• if there is more than one Attorney, will the powers be joint and several?
• when will the POA become effective?
• will there be any restrictions and limitation of power apply to the POA?
• how will the POA be certified /notarised/legalised?
• how will the POA be revoked upon completion of the tasks required?
• You should discuss these questions with a qualified solicitor before agreeing to issue or accept a Power of Attorney.

This is a complex area. If you are planning to appoint more than one Power of Attorney, or to replace an existing Power of Attorney document with a new one, you should seek legal advice.

A recent decision of the Supreme Court of New South Wales concerning the Capacity of the Principal or Donor of a Power of Attorney to appoint another Attorney went some way to addressing this issue:

• an elderly lady had appointed her grandsons to manage her affairs by way of enduring power of Attorney
• sometime later she appointed her daughter to be her Attorney, and consequently a question arose as to her mental wellness at the time
• medical evidence was called in addition to numerous lay witnesses
• the Court held that the Power of Attorney to the daughter was void, as the Principal lacked ‘capacity’ when she made that Power of Attorney, and that the earlier Power of Attorney to the Grandsons continued to operate, because when she made the initial Enduring Power of Attorney she had capacity
• the daughter was ordered to pay not only her own costs, but also the costs of the other party
• this is a difficult problem for Lawyers as the Principal /Donor of the Power of Attorney may appear quite lucid but not competent as far as the Courts are concerned.

In grey areas, such as the case above where there are concerns about the capacity of the Principal or Donor, it may be safer to make an application to the Guardianship Board, to obtain the Imprimatur of the Board.

Allowing the fox into the hen house

An elderly father had three children. He had made a number of Power of Attorneys, the last being a Power of Attorney to his eldest son, made by Lyons and Lyons Lawyers. The other children objected and lodged an application to the Guardianship Board.

The eldest son did not oppose the appointment of his sibling as Attorney. The Attorney appointed by the Guardianship Board, his sibling, systematically sold off virtually all of their father’s properties and bought holiday properties and so on.

The eldest son could not prevent his sibling stripping their father’s estate and using his assets for the Attorneys own purpose. This is why it is so important to retain a Lawyer – to provide safety valves and protections.

These restrictions and limitations must be incorporated into all Power of Attorney to prevent this sort of thing happening. When it comes to money, Estates bring out the absolute worst in those family members who have a sense of entitlement.