When it comes to “signing your life away”, there are few more literal examples than granting a power of attorney.
Deciding to whom to entrust your affairs in the event you can’t take care of them is a big call and can be daunting. However, giving careful consideration to who you want as your “stand-in”, and the extent of their powers, can put any jitters to rest.
While there are several types, the two most common powers of attorney are “enduring” and “ordinary”. In both cases, a “donor” gives an “attorney” the legal right to act on his or her behalf. Depending on the nature of the vested powers, that can mean signing cheques, selling houses, overseeing investments – and even deciding medical treatment.
Typically, “ordinary” powers are used for short-term or one-off situations – for example, you may be going overseas and want to sell your home while you’re away. Your attorney would be given the right to act, effectively, as you, and take care of any negotiations and documentation.
As its name suggests, an enduring power of attorney is ongoing.
Protection everyone needs
Janice’s Lesson Number 1: Who needs an enduring power of attorney? Every adult.
Anyone at any age can be struck down unexpectedly with illness or injury, rendering them incapable of handling their own affairs. The catch is once a person is deemed unable, if not already in place, a power of attorney can only be granted by the court.
In the meantime, most decisions, property and finances are left in limbo. Over and above the time and stress factors, the court process is costly – unlike seeing your lawyer and organising a power of attorney in advance.
The benefits of taking the initiative are potentially huge, far outweighing the relatively small fee involved in establishing an enduring power of attorney. What’s more, any power granted by the court tends to be less and, in some cases, loved ones have to go back and reapply to gain further rights.
Janice’s Lesson Number 2: “Well, you see, Janice, I’m married, so I don’t need to worry about this – my spouse will take care of my affairs.” Unfortunately, it’s not quite that simple. Spouses don’t have the automatic right to step into your shoes.
No automatic rights for spouses
For example, any accounts or properties that are in your name alone can be administered by only you. Whether you’ve been married 60 minutes or 60 years, chances are your spouse won’t have any immediate access or rights – unless you’ve planned ahead and granted power of attorney.
An enduring power of attorney is broken into two categories: property (basically, all assets) and personal care and welfare. For property matters, more than one attorney can be appointed, but for personal care and welfare only one can be named to hold the position at any one time.
Separate documentation must be completed for each and, while these forms are standard, there’s still scope to “personalise” them, highlighting your own special wishes. Rather than carte blanche authority, you may prefer to limit the powers or state things you would or wouldn’t want done, should you be unable to speak up for yourself.
Janice’s Lesson Number 3: Choose your attorney wisely.
Remember, if their powers are invoked, that person will have your rights. Give serious thought to the qualities, values and skills you’re looking for beforehand.
Your attorney can be anyone, as long as they’re over 20, not bankrupt and a New Zealand resident. Commonly, people choose their partner for personal care and welfare and, if they’re not comfortable with a family or friend taking care of the finances, opt for a professional, such as lawyer or accountant.
An attorney’s role
For their part, attorneys should think carefully before accepting the responsibility. It is a potentially onerous and sometimes emotional task.
An enduring power of attorney can only come into force when the donor has been declared incapable of making their own decisions. This is no rubber-stamping exercise. It is a very formal process whereby a doctor is required to conduct thorough examinations to unequivocally determine the donor is indeed completely incapacitated.
I’ve seen plenty of situations where family and friends are left quite upset when an enduring power of attorney is enacted, and they’re taken by surprise by the choice of attorney, the extent of their powers or the donor’s special wishes they haven’t been made aware of.
Janice’s Lesson Number 4: If you are deemed incapable, it will be a stressful time for your loved ones. As well as protecting you and the people you care about by arranging an enduring power of attorney, take the time to let those close to you know to whom your powers will pass to and why, and you could just spare them added grief.