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What is an Enduring Power of Attorney and why do you need one?
Losing the ability to make or communicate decisions about personal care and welfare or property is not something people want to think about or prepare for.
However, it is important to have Enduring Powers of Attorney (EPA) in place if old age, illness or an accident causes someone to lose the ability to make or communicate significant decisions. Contrary to popular belief, a person’s next of kin cannot simply make decisions for them, handle their property affairs or consent to medical treatment on their behalf.
Pauleen Clark previously wrote about applications to the Family Court for property orders and the appointment of a welfare guardian when there is no EPA in place.
This Court process is not only costly but can be time consuming and stressful at an already difficult time. The subject person has no control over who the Court appoints to look after their affairs. However, EPAs can prevent these problems from occurring.
What is an EPA?
There are two types of EPA.
- The first is in relation to personal care and welfare. This includes decisions made about a person’s medical treatment, where someone lives and how they are cared for.
- The other EPA is in relation to property, including the management of a person’s financial affairs.
EPAs differ from an ordinary power of attorney as they take effect after a person has lost capacity. In the case of property, they can also take effect immediately, which can be extremely helpful where someone needs assistance to manage their day-to-day affairs either temporarily or on a longer-term basis.
When putting an EPA in place, the most important thing to consider is who the attorney will be. This is because the attorney chosen has to be implicitly trusted to act on behalf of the person in relation to their financial affairs and/or personal care and welfare matters, and to make decisions in the person’s best interests.
When will they be used?
Generally, an EPA will come into effect when the subject person fails the test for capacity, in terms of:
- Property – when they are not wholly competent to manage their own affairs in relation to their property.
- Personal Care & Welfare – when they lack the capacity to:
- make a decision; or
- understand the nature of decisions; or
- see the likely results of those decisions or of any failure to make decisions; or
- communicate decisions.
Having EPAs in place means a jointly owned property, where one owner has lost capacity and is not able to sign a sale and purchase agreement, can still be sold. It is also possible to deal with bank accounts which are in the sole name of the incapacitated person, as well as investment portfolios, insurances and other assets they own in their sole name. EPAs are also required by most retirement villages when purchasing an occupation licence for a villa, apartment or unit.
While the EPA forms are based on standard templates in the legislation, they can be customised to suit a person’s unique circumstances, to ensure that their specific wishes are met. For example, they can ensure that specific family members are consulted about important decisions, or provided with information, and ensure that a back-up attorney is appointed should something happen to their attorney, and they are unable to act. Unfortunately, we have seen examples of poorly drafted EPAs that fail to take into account a particular person’s circumstances, causing unnecessary stress and impact on their family.
Conclusion
Having EPAs in place avoids the stressful, costly and lengthy exercise of going to the Family Court for a property order and/or to appoint a welfare guardian.
Similar to a Will, EPAs provide peace of mind because a person has decided ahead of time that someone they trust will look after their affairs, if needed.
Haigh Lyon’s trusts and estates team can assist with the process of putting in place customised Enduring Powers of Attorney. For more information contact Anthony Kuran on 09 306 0611 or [email protected]