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 or become mentally ill.
A Financial Power of Attorney gives a trusted person control over your 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 Power of Attorney 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 financial 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 (i.e. "endure") even when the person loses mental capacity.
A General Power of Attorney is a non-permanent arrangement which will come to an end when the person loses mental capacity. It is more commonly used to facilitate business transactions when the person commonly travels, or is really busy.
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.
A Financial Power of Attorney can be appointed to oversee any kind of financial or legal decisions including:
Accessing bank accounts
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.
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.
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:
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.
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. A prescribed witness generally includes a solicitor, but each state has specific requirements.
This witness must explain the full impact of the Power of Attorney, and confirm you understand the document before watching you sign the it. The nominated Attorney should also sign the document 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.
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.
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.
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.