What is a Power of Attorney?
A power of attorney is a legal document made by a “principal” who is giving someone else, their “attorney”, the formal authority to manage their legal and financial affairs until the principal dies. This can include spending and managing the principal’s money, buying or selling shares for the principal or buying, selling, leasing or mortgaging the principal’s house or other real estate investments in accordance with the principal’s instructions.
A power of attorney only authorises an attorney to act in relation to legal and financial matters. It does not allow the attorney to make personal decisions for the principal, for example they cannot make health or other personal decisions. A separate Appointment of Enduring Guardian needs to be made to allow someone else to make any medical, treatment and other personal or lifestyle decisions for you. Please see our separate Guide to An Enduring Guardian.
Also, your attorney cannot carry out your duties as a trustee for someone else and the power of attorney ceases to have effect once you have passed away, after which your Will comes into effect. The attorney also does not have the right to act if you “revoke” the power (see below) once they die; resign; become bankrupt; lose their mental capacity; or by order of a relevant tribunal or court. They also cannot act where it may cause a conflict between your interests and their interests unless this is specifically authorised in your power of attorney.
Should I make a power of attorney?
By appointing an attorney, there will be someone who is legally authorised to do things for you when you cannot look after your finances for yourself. For example, if you become ill, go overseas, or become unable to go to banks or government offices etc. If you want someone to be able to buy, sell or deal with real estate on your behalf, then a power of attorney is essential.
When should I make a power of attorney?
It is important to make a power of attorney before you need it. Once you have lost mental capacity, you cannot make a power of attorney because for a power of attorney to be effective, you must have the legal mental capacity to understand the nature and effect of what you are signing.
What type of power of attorney should I make?
There are two types of powers of attorney, each with a different prescribed form:
1. General Power of Attorney:
A general power of attorney can be useful for a short term appointment, for example while you are away overseas. It is also useful if you want the attorney to act only in relation to certain one-off transactions, for example to sell or buy property, shares or other financial assets on your behalf. A general power of attorney can be easily tailored to meet your requirements.
To make a general power of attorney your signature need only be witnessed by a person over the age of 18 years who is not the attorney being appointed. A general power of attorney may start as soon as it is signed by you and given to your attorney. It is not necessary for the attorney to sign the power of attorney. If you do not want your attorney to start using the power of attorney straight away, you can state on the power of attorney document when you want it to start.
It is important to understand that a general power of attorney automatically terminates if you lose mental capacity and the attorney must immediately cease to act as your attorney.
2. Enduring power of attorney:
An enduring power of attorney is used if the principal wishes their attorney to make decisions for them in the long term and continues to operate even after the principal has lost mental capacity. By making an enduring power of attorney, there will be someone who can legally look after your legal and financial affairs if you become unable to do so. This could be due to physical problems, loss of mental capacity or something unforeseen such as an accident.
You can make special directions in the enduring power of attorney document about what you want your attorney to be able to do or impose limits on what they can do.
Your signature on an enduring power of attorney must be witnessed by a “prescribed witness” that is by an Australian legal practitioner, a Registrar of a Local Court, certain licensed conveyancers, a NSW Trustee & Guardian employee or certain Trustee company employees. The prescribed witness must sign a certificate on the enduring power of attorney form stating that they explained the enduring power of attorney to you and that you appeared to understand it.
The attorney and any substitute attorney has to sign the form of enduring power of attorney to show they consent to act before it can operate. This can occur at the same time as you sign or at a later time.
If you lose mental capacity and do not have an enduring power of attorney then an application must be made to the Civil & Administrative Tribunal to seek the appointment of a financial manager to make decisions on your behalf. The financial manager may not necessarily be the person you would have chosen. For this reason, you should consider using the enduring power of attorney instead of the general power of attorney while you are still in good health and can choose the person you want to be your attorney. Once you have lost the mental capacity to understand what you are doing, you cannot make a power of attorney.
Do I lose my rights?
No. Making someone your attorney does not mean that you lose your right to look after your money and property how you wish while you still have mental capacity to do so.
Who can I appoint as my attorney?
Any person over the age of 18 years can act as your attorney. It can be a family member or a friend who you trust. You should ask the person you want to appoint if they will agree to be your attorney and look after your money and property. Only appoint a person you can trust to look after your affairs.
You can also appoint the NSW Trustee & Guardian, a trustee company or a professional such as a solicitor or an accountant, but they will be entitled to charge a fee for acting as your attorney.
If you appoint more than one attorney you need to indicate whether you want your attorneys to act “jointly” (they all need to agree and all of them must sign any document) or “jointly and severally” (they can act individually or together). If you appoint more than one attorney to act jointly, you should also indicate whether you want the power of attorney to automatically terminate if one of those joint attorney dies, become bankrupt or does not want to act as an attorney any longer ( they “vacate” the appointment). You may want the power of attorney to continue despite one of the joint attorneys no longer acting.
You can also appoint one or more “substitute” attorneys. This is helpful in situations where your original attorney leaves the country, no longer wants to be an attorney or dies, then the substitute attorney becomes authorised as your attorney.
What can my attorney do?
With some exceptions, and depending on what limits or condition you impose in the power of attorney document, your attorney can do all the things that you can do with your legal and financial affairs. For example an attorney can sell, lease or mortgage your house, sell your personal belongings, take money out of your bank, gain access to your documents (other than you Will) and sell your shares.
It is important to understand that anything your attorney does for you under the power of attorney, as long as it is legal, is binding on you.
What are my attorney’s obligations?
An attorney is under a duty to always act in your best interests, except if specifically authorised in the power of attorney document by you.
An attorney must keep their money and assets separate from your money and assets (unless you and your attorney are joint owners or operate joint bank accounts). They also must keep proper accounts and records of how they handle your money and assets.
The NSW Trustee & Guardian, or anyone interested in your welfare, can require the attorney to produce these accounts and records. If the attorney does not carry out the obligations properly, they may have to compensate you. It is also possible that a transaction by the attorney may be cancelled, or that the power of attorney will be terminated or the attorney replaced.
Except where the power of attorney document says otherwise, the attorney cannot be paid for his or her work as attorney, although they can claim any out-of-pocket expenses directly connected with carrying out their duties as your attorney. The attorney should keep receipts to prove these costs.
If a solicitor, the NSW Trustee & Guardian or a trustee company is appointed as attorney, the power of attorney document may contain a clause allowing them to charge a fee for acting or this may be covered by a separate agreement.
Can my attorney use my money for gifts?
An attorney cannot make any gift of your money or property unless the power of attorney form specifically allows the attorney to do so.
Both power of attorney forms contain a standard clause authorising an attorney to give reasonable gifts of only certain types such as gifts to a relative or close friend of yours of a seasonal nature or because of a special event such as a birth or marriage. Also allowable are donations of the kind that you made before or might reasonably be expected to make such as to a favourite charity, however the value must be reasonable having regard to your financial circumstances and the size of your estate.
You can delete this clause if you don’t wish your attorney/s to have this power.
Can my attorney use my money for their own or another’s benefit?
Not unless you have specifically noted this in your power of attorney form. There is a clause in the power of attorney form that allows for this but the benefit must be reasonable having regard to your financial circumstances and the size of your estate. Care should be exercised in giving this power.
Again, you can delete this clause if you don’t wish your attorney/s to have this power.
Can I change my mind and cancel a power of attorney?
Yes, you can “revoke” a power of attorney at any time as long as you still have mental capacity. You must do this in writing to the attorney/s. Once the attorney knows of the revocation, that attorney must not do any act or thing under the power of attorney.
You should also inform your bank that the power of attorney has been revoked, and anyone else you might expect to act on the power of attorney you have revoked. If the power of attorney you are revoking is registered, then it is advisable to register the revocation.
What happens if I marry or divorce?
Divorce or marriage does not revoke a power of attorney.
What happens if there is a dispute?
If there is a dispute involving a power of attorney and the people involved cannot settle it, they will have to go to either the Civil & Administrative Tribunal or to the Supreme Court.
Can I use a power of attorney in NSW if it is made interstate or overseas?
Generally, it is possible to use a general power of attorney in NSW even if it was made interstate or overseas, but it must have certain features, that is:
Each state and territory of Australia has different requirements for making enduring powers of attorney and they may be wholly or only partly valid in NSW.
Can I use a NSW power of attorney outside NSW?
Some Australian states and foreign countries have different requirements and if you want to use your power of attorney outside of NSW you will need to check that it complies with the requirements of that particular place.
I appointed an attorney before 13 September 2013. Is the power of attorney still valid?
Yes, however you may wish to update your power of attorney to ensure that it is still effective to carry out your wishes. Amendments to the Powers of Attorney Act 2003 were made on 13 September 2013 to make it easier to make a power of attorney and to provide increased security against fraudulent acts by an attorney.
If your power of attorney is dated prior to 16 February 2004, different laws apply in regard to how the sale of assets affects a gift in your Will.
Do I have to register my power of attorney?
You must register your power of attorney if you want your attorney to sell, mortgage, lease or otherwise deal with your real estate. Otherwise it is not necessary. Powers of attorney are registered with the Land & Property Information office and there is a registration fee payable to Land & Property Information.
Where should I keep my Power of Attorney?
You should keep your power of attorney in a safe place. You should also give a copy to your attorney/s and it’s a good idea to give a copy to anyone else who needs to know its contents, eg your solicitor or accountant.
