What is a power of attorney

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A power of attorney is a legal document in which one person nominates and gives legal authority to another to act on affairs on their behalfi. In effect, a power of attorney allows you delegate the management of your affairs to someone you trustii. The nominated person is known as an agent - who, despite the term, does not have to be an attorney (another name for a lawyer) - and the person nominating is known as the principal.

Appointed powers of attorney can take on many roles. Principals can use their power of attorney to conduct their affairs within Australia while they are overseas, including buying and selling property, operating a bank account, voting at meetings or functions, and moreii. Your power of attorney will be vastly distinct from someone else's as the powers depend on your specific situation and the responsibilities you choose to entrust in your nominee(s)iii.

A power of attorney is a legal document that gives a person, nominated by you, the power to act on your behalf.

Types of powers of attorney

In Australia, the powers you can delegate to your agent will differ depending on which state or territory you live iniii.They can refer specifically to financial powers, or they might include broader guardianship powers. To be sure you will need to check with your local Public Trusteeiii. Nonetheless, generally speaking there are two types of power of attorney: general and enduring.

General power of attorney

A general power of attorney is where you appoint someone to make financial and legal decisions for you, usually for a specified period of timeiii. An example might be if you're overseas and unable to manage your legal affairs at home.

A general power of attorney does not give an agent the power to make personal, medical or lifestyle decisions on the principal's behalfiv. In addition to this, an agent's appointment becomes invalid if the principal loses the capacity to make their own decisionsiii. That is, the powers granted cease as soon as the principal is deemed mentally incompetentii.

Enduring power of attorney

If an enduring power of attorney is signed, agents can be called upon to make decisions for the principal in a situation where the agent does not have the mental capacity to attend to their own affairs, i.e. if an agent is unable to understand and give legal consent to an action or arrangementi.

Financial and legal authority

An enduring power of attorney authorises your agent to make financial and legal decisions for you while you are alive but only if you are unable to make these decisionsiii. For example, if you become mentally incapacitated or temporarily unconscious due to a brain injury, accident or illness. In Victoria, the financial power of attorney allows the appointed agent can make financial and legal decisions on the principal's behalfv.

Depending on the State/ Territory of residence, medical authority may or may not be included within an enduring power of attorney. In States that do not permit medical authority to be granted via enduring powers of attorney, a separate document that specifically permits the delegation of medical power is required.

Medical authority

In Victoria the medical power of attorney permits the agent to make decisions on the medical treatment of the principal, such as agreeing to or refusing surgery for that personv. In New South Wales an Enduring Guardianship allows an enduring guardian to make health (including medical) and lifestyle decisions for the principal if he/she has lost capacity to do sovi. In Victoria, the Enduring Power of Attorney (medical treatment) and the Enduring Power of Guardianship are separate documentsv.

Make sure to check your individual State or Territory requirement so you know which type of power of attorney is applicable and relevant to youv.

It's best to seek legal advice before drawing up a power of attorney to ensure that you are well informed of the decisions you make.

How does it work?

When drawing up a power of attorney, you must have the capacity to understand the implications and consequences involved in appointing an agentvii. If you are unable to comprehend this, the appointment will not be legally validvii. Therefore, it is best to go through this process when you are physically and mentally healthy. Pre-empting the consequences of tragedy can help you rationally select a suitable and trustworthy nominee, as well as give you time to revoke the appointment if you feel that it is necessaryvii.

It's important to note that the laws involved in drawing up a power of attorney can be complicated. If you are uncertain about the drafting rules that apply or how to get started, you may wish to seek legal advice to help you with this document and make sure your power of attorney is legally validvii. Remember that unless your power of attorney is deemed valid by law, the delegation of powers set out in it cannot come into effectvii.

Planning ahead for your future

It's difficult to consider what could happen in the event of an accident or critical illness. However, planning ahead and anticipating medical emergencies or disability may save you and your family from legal and financial burdens in the event that the unfortunate becomes reality. This is where an enduring power of attorney or medical power of attorney can help. Arranging for a trusted and reliable relative or friend to make decisions on your behalf can give you a peace of mind that your affairs will be kept in order no matter what happens.

In addition to a power of attorney, there are also other legal documents you can prepare to help legal appointees and family members make decisions on your behalf. You may consider drawing up a living will (also known as an advance healthcare directive) which outlines how your body should be dealt with if you lose the capacity to make those decisions yourselfiii. Taking out life insurance can ensure that your family is financially secure in the event of an accident or illness that renders you unable to work. Start exploring your options today by visiting the Allianz website.

i Office of the Public Advocate, Powers of Attorney, State Government Victoria, http://www.publicadvocate.vic.gov.au/powers-of-attorney/

ii Department of Health and Ageing, 2009, Power of attorney, Australian Government, http://www.agedcareaustralia.gov.au/internet/agedcare/publishing.nsf/Content/Power%20of%20attorney-1

iii Money Smart, 2012, Wills & powers of attorney, Australian Securities & Investments Commission, https://www.moneysmart.gov.au/tools-and-resources/information-for/over-55s/wills-and-power-of-attorney#attorney

iv Department of Health and Ageing, 2009, Help staying at home Power of attorney, Australian Government, http://www.agedcareaustralia.gov.au/internet/agedcare/publishing.nsf/Content/Power%20of%20attorney-1

v Victoria Legal Aid, Powers of attorney and guardianship, http://www.legalaid.vic.gov.au/attorney.htm

vi NSW Public Guardian, Attorney General & Justice, http://www.lawlink.nsw.gov.au/lawlink/opg/ll_opg.nsf/vwfiles/final_eg2011_reprint.pdf/$file/final_eg2011_reprint.pdf, p. 6

vii Department of Justice, 2012, Power of Attorney, State Government Victoria http://www.justice.vic.gov.au/home/the+justice+system/power+of+attorney/