Financial Power of Attorney is a legal directive that gives someone the authority to manage your financial matters- including money and other assets. The attorney form nominates an individual - ‘The Principal' - to represent you as your ‘Attorney' if you lose capacity to make your own decisions, due to illness or physical disability.
Power of attorney documents grant this person legal authority to take control of financial and legal matters if this occurs- ultimately helping to look after your affairs according to your own wishes, and safeguard your life work for your family.
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 will appoint a trusted person control over your bank accounts, share holdings, insurance payouts, and anything related to money or assets. Financial power of attorney powers also extend to legal decisions, if the need to sign documents or appear in the Supreme Court on your behalf arises.
Whilst they can end of making financial calls which indirectly impact lifestyle, a Financial Power of Attorney should not be confused with a Medical Power of Attorney or Enduring Guardianship. Alternatively, these respective power of attorney powers covers instructions for healthcare, lifestyle and medical treatment 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. Similar to an enduring guardian over healthcare decisions, this role and associated powers remain in place whilst you are legally incapacitated.
A General Power of Attorney is a non-permanent arrangement which will come to an end when the person loses mental capacity. General power 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.
You can also appoint the same person or different people across the different power of attorney roles. This might be relevant if you have a different person you'd like to make your medical decisions and lifestyle decisions is different to the person you want handling your financial matters.
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
Whilst your Attorney has certain legal authority, this comes with 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, financial and legal decisions. 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.
Crucially, this means the person you appoint as financial power of attorney is not merely granted powers to act according to their own views, or to sell things and go rogue. This person's views should be aligned with your own, and aimed at serving your best interest whilst you are legally incapacitated.
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, as well as guidance on how you'd like them to manage financial matters on your behalf. 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 legal problems can arise if this document is not structured in a certain way. To grant powers to a financial power of attorney authority over financial matters, it's important the document is 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 if you lose control of decision making capacity, or the ability to manage your own financial affairs.
Assuming you meet all legal requirements, this legal document allows you to appoint a trusted person to take care of your finances on your behalf. This person will be granted the authority to act for a specified time, to take reasonable steps to protect and manage your estate if you lose capacity.
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, and can ensure the person you appoint if briefed on your own wishes.
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, but with the same power and recognition in the Supreme Court.
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.