Opinion: How an enduring power of attorney can protect you and your adult children
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An enduring power of attorney (EPOA) is one of the most important documents you can make during your lifetime. It provides instructions to someone you nominate to act on your behalf if you lose capacity temporarily such as during a period of severe illness and recovery or permanently for example in the case of dementia.
It can also be a protective strategy for adult children to put in place, including for when they are travelling overseas.
What is it?
They can vary between states and territories, but generally, EPOAs involve you, or your adult child, appointing an ‘attorney’ along with documented directions on how medical and financial matters are to be dealt with, in the event of some kind of incapacity.
Generally, the individual or lawyer who is appointed as the attorney can do all the things you can do in relation to your legal and financial affairs, such as buying and selling real estate, operating bank accounts, paying bills, entering and into legal agreements, all on your behalf, or exercising your rights as a shareholder and managing investments.
The arrangement can also apply to children travelling abroad, who can be exposed to risks such as scams, serious injury, theft and even stolen identities. Getting your offspring to give you or another family member power of attorney before they travel or work overseas can help protect and support them.
As an example, imagine the situation where your adult child is unable to contact their bank if they are caught up say, in an environmental disaster somewhere. Creating a power of attorney over your child’s financial and legal affairs can enable quick and efficient contact with their financial institution if they are not in a position to do it themselves.
Another benefit is the ability to obtain legal authority to make decisions on behalf of your child, if and when issues or opportunities arise, for example having to negotiate with an insurance company on their behalf if they are in an overseas hospital.
Who should you appoint?
It’s no easy job taking on the role and responsibility of attorney appointed under an EPOA and in some cases, it’s difficult to know exactly what you can and can’t do as an attorney. Also, for some Australian states and territories, an individual can place limitations and conditions on the attorney which is legally binding on the attorney.
Parents can be an obvious choice as attorneys for adult children. But it can also be other family members, a close friend, or their lawyer. When appointing an attorney to manage financial decisions, there are a number of points to consider:
- Think about appointing more than one person so they must act jointly (both must act) or jointly and severally (either one can act)
- Consider if an independent appointment, such as a professional trustee company, is better suited to your circumstances
- Having a ‘plan B’ by appointing a substitute attorney to act if the first person can’t act for any reason
- Making specific and clear provisions in the power of attorney document about what benefits, if any, your attorney can derive from your assets
- Obtaining advice about whether to give expanded powers for your attorney to, for example, renew a superannuation binding death benefit nomination or to make seasonal gifts
- Look at whether you should have separate powers of attorney dealing with different assets.
- Consider if you need to have restrictions around what an attorney can do, or for how long they can have the power-for example limiting the power to operate only during certain dates.
Getting the right advice
It’s important that you get advice when making an EPOA so you can make sure you have the right supporting documents and particular provisions in your EPOA document that they will do what you need them to do.
And understanding your responsibilities if you have a power of attorney appointment for your adult children, for example, is as much about ethical as well as legal responsibilities.
Being appointed an attorney under an enduring power of attorney authorises you to make important legal and financial decisions when someone loses capacity – or chooses not to make these decisions for themselves.
It means you have to step into the shoes of the person you are acting for and act only in their best interests. Ordinarily, an attorney is not allowed to benefit from the assets of that person while they are acting as an attorney – which makes sense since it can create a situation where judgment can be clouded.
If someone has lost capacity and there is concern around the decisions made by an attorney or if an attorney is not acting in the best interests of a principal, it is possible to have the attorney’s appointment and decision-making reviewed by the relevant State and Territory Tribunal or Supreme Court.
However, like many things in life, a little planning goes a long way – and thinking carefully about this document before there is any pressure or expectation to do so is the best course of action.
Stephen Hardy is a Senior Lawyer at Equity Trustees. Equity Trustees is a specialist in wills and estate planning, developed on a foundation of more than 130 years of experience. More information about Equity Trustees’ wills and estate planning services is available on our website.
