Introduction

A comprehensive estate plan is not just about distributing your assets after you pass away; it also involves putting safeguards in place for managing your affairs during your lifetime. Powers of attorney are a vital part of this process, allowing you to appoint a trusted person to make financial and legal decisions on your behalf if you become unable to do so yourself.

Including a Power of Attorney is essential for protecting your interests and ensuring your wishes are followed, which provides invaluable peace of mind. This guide explains why powers of attorney are a critical component of your estate plan and offers practical information on how to draft these important documents and appoint the right person for the role.

What Is a Power of Attorney?

Defining a Power of Attorney in Your Estate Plan

A Power of Attorney (POA) is a legal document that allows you to appoint a trusted person or organisation to manage your legal and financial affairs on your behalf. This vital component of your estate plan empowers your chosen representative, known as an attorney, to make decisions for you.

The primary purpose of a POA is to ensure your interests are safeguarded if you become unable to manage them yourself due to:

• Illness
• Injury
• Extended absence

By establishing this document, you create a legal framework that protects your affairs when you cannot personally oversee them.

Differentiating a Power of Attorney from a Will

While both are essential components of a comprehensive estate plan, a POA and a Will serve distinct functions and operate at different times:

Document	Function & Validity
Power of Attorney	Only valid during your lifetime, enabling your appointed attorney to manage your affairs while you are alive.
Will	Only takes effect after your death, dictating how your assets are to be distributed by your executor.

It’s important to understand this fundamental distinction – the authority granted to an attorney under a POA ceases immediately upon your passing. At this point, your Will becomes the governing document for your estate.

Exploring the Main Types of Powers of Attorney

General Power of Attorney

A General Power of Attorney is a legal document that allows you to appoint a person to manage your financial and legal decisions for a specific period or purpose. This type of power is often used for short-term situations, such as:

• Authorising someone to purchase property on your behalf while you are overseas
• Allowing them to access your bank account to pay bills temporarily

The authority granted under a General Power of Attorney is only valid while you have the mental capacity to make your own decisions. This arrangement is flexible and can be adapted to suit particular circumstances. However, its key limitation is that the power becomes invalid if you lose the ability to manage your own affairs.

Enduring Power of Attorney

Unlike a General Power of Attorney, an Enduring Power of Attorney is a continuous type of power that remains valid even if you lose the capacity to make decisions for yourself. This makes the enduring power of attorney a crucial component of any comprehensive estate plan, as it provides long-term protection and ensures your affairs can be managed without interruption.

Because it continues to operate after you become incapacitated, this document allows a person you trust to make important financial and legal decisions on your behalf without any delay. Without a valid enduring power of attorney, your family might face a lengthy and difficult legal process to gain the authority to manage your interests.

Enduring Guardianship for Health & Lifestyle Decisions

It is important to understand the distinction between the different types of powers of attorney and an Enduring Guardianship. In NSW, an attorney appointed under a POA can only make financial and legal decisions. They cannot make choices about your health or lifestyle.

For decisions regarding your personal welfare, you need to appoint an Enduring Guardian. This person is authorised to make decisions about:

• Your health and medical care
• Where you live and with whom
• Other lifestyle matters

An Enduring Guardianship complements your powers of attorney by ensuring all aspects of your life are covered, from finances to personal care, should you become unable to decide for yourself.

Why Powers of Attorney Are Vital for Your Estate Plan

Ensuring Protection & Continuity During Incapacity

One of the most important reasons POAs are vital for your estate plan is to protect your financial and legal interests if you become incapacitated. Incapacity can happen unexpectedly at any time due to illness, an accident, or simply advanced age.

An enduring power of attorney ensures that someone you trust has the immediate legal authority to manage your affairs without delay. This continuity of financial management allows your appointed attorney to handle important tasks on your behalf, such as:

• Operating your bank accounts
• Paying your bills
• Managing your property and investments
• Ensuring your financial responsibilities are met

Without an enduring power of attorney, your finances could be neglected while your family navigates a complex legal process to gain the authority to act for you.

Maintaining Control Over Who Manages Your Affairs

Appointing a POA allows you to maintain control by choosing who will manage your affairs if you are unable to do so yourself. You can select a trusted family member, a close friend, or a professional advisor who you believe will act in your best interest and respect your wishes.

If you do not have a POA in place, the decision of who manages your finances may be taken out of your hands. In such cases, a court or tribunal could appoint someone under a financial management order, and there is no guarantee that this person would be someone you would have chosen.

A comprehensive estate plan that includes a POA ensures your affairs are managed by a person you trust, giving you peace of mind about your future financial management.

Avoiding Costly & Stressful Court Intervention

Having a valid POA helps your family avoid potentially expensive and stressful legal complications. If you become incapacitated without one, your loved ones may need to apply to a court or tribunal, such as the NSW Civil and Administrative Tribunal (NCAT), for a financial management order to handle your affairs.

This court process can be:

• Lengthy and time-consuming
• Costly in terms of legal fees
• Emotionally draining for your family, especially during an already difficult time

An enduring power of attorney is a proactive step that prevents this legal uncertainty, ensuring your financial matters can be handled seamlessly without the need for court intervention.

How to Appoint the Right Person for Your Power of Attorney

Key Qualities to Look for When You Appoint an Attorney

Choosing the right person to act as your attorney is a critical decision, as they will have significant power over your affairs. It is essential to appoint someone you trust completely who can manage your interests responsibly.

When selecting an attorney for your POAs, consider individuals who demonstrate these key qualities:

Quality	Description
Trustworthiness & Integrity	Honesty and reliability are paramount, as the attorney may control your finances. Choose someone with a strong ethical foundation who will not misuse their authority.
Availability	The person should be accessible and ideally live nearby to respond promptly to issues and manage affairs efficiently without being hindered by distance.
Relevant Skills	Consider the complexity of your affairs. Appointing someone with financial acumen is wise for significant investments, while empathy is key for personal and health decisions.
Willingness to Act	Discuss your intentions with the potential attorney to ensure they are comfortable with the responsibility, understand your wishes, and agree to take on the role before being formally appointed.

Understanding an Attorney’s Duties & Responsibilities

An attorney appointed under a POA has a legal obligation, known as a fiduciary duty, to always act in your best interests, a role with responsibilities that are often compared to the duties of an executor of a will. They must manage your affairs honestly, responsibly, and in accordance with your instructions.

The primary duties and responsibilities of an attorney include:

Duty / Responsibility	Explanation
Act in Your Best Interests	All decisions must be made for your benefit and be consistent with your known wishes and values.
Avoid Conflicts of Interest	An attorney must not use your finances to benefit themselves or others unless specifically authorised in the document.
Keep Finances Separate	They are required to keep their own money and property separate from yours to ensure clear and transparent management.
Maintain Accurate Records	Your attorney must keep detailed and accurate records of all transactions and dealings conducted on your behalf.
Respect Confidentiality	They must respect your right to privacy and keep your personal and financial information confidential.

The Process to Draft & Activate Your Power of Attorney

Meeting Legal Requirements to Draft Your Power of Attorney Document

For a POA to be legally valid, the person creating it must have the mental capacity to fully understand the document and the authority they are granting. This means they must be of sound mind and able to make informed decisions about their affairs when signing.

Specific witnessing rules must also be followed to ensure the document is enforceable. The requirements vary depending on the type of power of attorney being created:

Type of Power of Attorney	Witnessing Requirement
General Power of Attorney	Can be witnessed by anyone over the age of 18, as long as they are not an attorney appointed in the document.
Enduring Power of Attorney	Must be witnessed by a prescribed person, such as a solicitor, barrister, or a Registrar of the NSW Local Court.

The witness for an Enduring Power of Attorney must also sign a certificate confirming they:

• Explained the document to you
• Were satisfied you understood its effect
• Are not an appointed attorney

Deciding When Your Powers of Attorney Become Active

When drafting your POAs, you can decide when the document becomes active. This flexibility allows you to tailor the arrangement to your specific needs and preferences.

You can nominate your POAs to commence either:

Commencement Option	Description
Immediately upon signing	This allows your attorney to act on your behalf straight away.
Upon a specific trigger event	Often called a “springing” power of attorney, the document only becomes active after a specified event, such as a medical professional certifying your loss of capacity.

The Importance of Regularly Reviewing & Updating Your Power of Attorney

POAs are not “set-and-forget” documents and should be reviewed regularly to ensure they continue to reflect your wishes and circumstances. It is wise to revisit your POA every few years as part of keeping your estate plan current and updated, which allows you to confirm that your chosen attorney is still willing and able to act on your behalf.

Significant life events should also trigger a review of your estate plan, including your POAs. These events may include:

• Marriage or divorce
• The birth of a child
• Changes in your financial situation
• A change in your attorney’s circumstances, such as them moving away

Updating your documents ensures they remain relevant and effective, providing you with continued protection and peace of mind.

Conclusion

A comprehensive estate plan requires POAs to manage your affairs during your lifetime, protecting your interests if you become incapacitated. Understanding the different types of POAs, how to appoint a trusted person, and the process for creating a valid document is essential for ensuring your wishes are followed.

To ensure your estate plan is robust and provides complete peace of mind, contact thewills and estates law firm of PBL Law Group for trusted legal advice. Our team can help you draft a POA tailored to your specific needs, securing your future and protecting your legacy.

Frequently Asked Questions