What is a Financial Power of Attorney
The thought of giving someone total control over your finances can be terrifying. But appointing a financial Power of Attorney can actually give you greater control over your own life when you get sick or lose capacity. Preparing for the worst can give you a chance to choose someone you trust to look after your affairs according to your own wishes.
What is a Financial Power of Attorney?
Financial Power of Attorney is a legal directive that gives someone the authority to manage your money and other assets. The document nominates an individual who will step in for you - ‘The Principal’ - as your ‘Attorney’ and take control of your financial and legal responsibilities for you. When these directives come into effect will depend on your instructions. For most people, the powers come into play if you lose your decision-making abilities - for example, if you fall into a coma, become mentally ill, or if you are imprisoned.
A Financial Power of Attorney gives control over bank accounts, share holdings, insurance payouts, and anything related to money or assets. They can also make legal decisions and sign documents on your behalf. A Financial POA should not be confused with a Medical Power of Attorney or Enduring Guardianship which provides instructions for healthcare and medical decisions.
There are two different variations of Power of Attorney which will impact the extent of an Attorney’s responsibilities.
An Enduring Power of Attorney is a permanent arrangement which will remain in place until someone’s death.
A General Power of Attorney is an arrangement which ceases when someone loses their mental capacity. It can be set up to authorise another person to manage legal and financial affairs if you lack the mobility to do it yourself.
It’s also possible to have more than one Attorney, and in this case you would decide whether your Attorneys have the power to act:
Jointly - where all of your attorneys have to agree before making decisions or taking action; or
Jointly and severally - where they can act either together or independently of each other.
What decisions can a Financial Power of Attorney make?
A Financial Power of Attorney can be appointed to oversee any kind of financial or legal decisions including:
Accessing bank accounts
Paying bills
Collecting rent
Managing investments e.g buying or selling shares or bonds
Managing property or other assets
Accessing welfare or insurance payments on your behalf
Signing legal documents
Your Attorney has certain obligations to meet while performing their duties. If they broach their responsibilities they could be liable to civil or criminal penalties. They are responsible for keeping detailed records of any transactions they make or other dealings with your money. They must keep all money and assets separate from their own and act honestly in accordance with the instructions set out in the Power of Attorney document.
Who should I nominate as my Financial Power of Attorney?
Choosing who becomes your personal representative is a major decision. The person you appoint may have total control over your financial and legal affairs, so it should be someone you trust to act in your best interests. Most people nominate their spouse or a family member, but your Power of Attorney does not have to be a relative. You can appoint a friend or a professional like a lawyer or accountant. Before making the decision you should talk to the person you want to appoint since the position demands a lot of responsibility.
How long does it take to come into effect?
When a Power of Attorney comes into effect will depend on your specific circumstances. When creating the document you should leave clear instructions to your nominated Attorney about how and when they should step in. You can authorise their duties to begin:
Immediately;
From or to a specific date;
As a result of certain events e.g a coma or the onset of dementia;
When a doctor determines you are no longer capable of managing your own affairs;
Or when the appointed Attorney determines you are no longer capable.
How do I appoint a Financial Power of Attorney?
Appointing a Financial Power of Attorney is typically done with the assistance of a legal professional or Public Trustee. This is because the document must be structured in a certain way and signed by a ‘prescribed witness’ in order to be valid. Under the Powers of Attorney Act 2003 a prescribed witness includes:
A barrister or solicitor;
A public Trustee;
Licensed conveyancers;
A local court registrar
This witness must explain the full impact of Power of Attorney, and confirm you understand before watching you sign the document. The nominated Attorney should also sign the form to accept their appointment for the role.
Some state or territory authorities have created a template which can be used to create your own Power of Attorney document. The document must contain the name and address of the Principal and the person being appointed as the Attorney. It should include detailed instructions around how they can use assets, and any limitations on using funds.
Safewill has also launched a new service through our platform allowing you to appoint a Power of Attorney on your laptop or mobile device. The easy-to-use form allows you to customise your preferences, and each document is verified by a lawyer for your own protection.
Summary
Appointing a Financial Power of Attorney can give you peace of mind that your affairs will be looked after when you can’t do it yourself. The legal document allows you to appoint a trusted person to make financial and legal decisions for you how and when you want.
You can choose how and when you want to give someone authority over your affairs depending on your choice of Power of Attorney. If you are immobile you can create a General Power of Attorney and give someone power immediately to help with bank visits or other financial matters. If you want to safeguard your finances for the future you may consider an Enduring Power of Attorney instead. This will come into effect if you fall unconscious or become incapacitated in some other way.
Like a Will, a POA is a vital way to protect yourself and your loved ones. Getting organised early will make it easier for everyone when the time comes. Safewill wants to make sure every Australian is protected, regardless of age, wealth or social status. We launched our Power of Attorney product to help you do this for a fraction of the cost of other legal professionals. Our team at Safewill Legal personally reviews each document so it is legally valid as per the laws in each Australian state and territory.
Disclaimer: The information contained in this guide is not intended to be a substitute for legal advice but as a basic guide to the application process. If you have concerns or queries you should consult a legal professional about your specific circumstances.