Bringing Private Wealth Management to All Australians
1300 990 990

Enduring Power of Attorney

A Power of Attorney is simply a document under which a person (‘the donor’) gives to another person (‘the donee’) the power to act on their behalf within the terms of the document.

The effect is that all acts done by the donee (the person who receives the power) acting in accordance with the terms of the Power of Attorney have the same legal effect as if they had been done by the donor (the person who gave the Power of Attorney).

Why Do I Need An Enduring Power Of Attorney?

What distinguishes an Enduring Power of Attorney from any other Power of Attorney, is that it will continue to be operative should the donor lose legal capacity, for example, through unsoundness of mind. An ordinary Power of Attorney will terminate should such an event occur.

Some of the benefits of an Enduring Power of Attorney are best illustrated by an example: Mr & Mrs Brown are both employees (not involved in a business partnership or a solely owned business). Their primary residence, as well as their personal accounts, are held jointly. Assume that one day Mr Brown was driving home and was involved in a car accident in which he was severely injured, both physically and mentally. As a result of Mr Brown’s mental injuries he has lost legal capacity (i.e. suffered from what is commonly referred to as ‘unsoundness of mind’). Mr Brown lacks legal capacity to sign and/or execute any legal documents.

Assume that the family home was mortgaged. Responsibility for paying the mortgage now rests with Mrs Brown. She must find extra funds to pay for her husband’s medical and hospitalisation expenses. Hopefully, Mr Brown would have taken good advice and will have had appropriate insurance in place to assist the family through this difficult financial period.

Mrs Brown has a number of issues to deal with:

1. the personal accounts are held jointly, requiring both Mr and Mrs Brown’s signature, she is unable to sign cheques to use any money in those accounts, and

2. should she decide to sell the house (as she cannot meet the mortgage repayments alone or to meet her husband’s medical expenses), she will be unable to do so, as the house is owned jointly.

In cases where a person loses legal capacity, control of their assets comes under the power of the Office of the Protective Commissioner.

Mrs Brown would need to petition the Officer of Protective Commissioner through the Supreme Court and apply to be the manager of her husband’s assets. This will not only involve legal costs and delays, but will also require Mrs Brown to prove to the Supreme Court that she is the appropriate person to look after such matters.
Consider also that Mr Brown also holds shares in XYZ Limited. Due to changes in the industry the shares are expected to drop sharply. Until Mrs Brown is able to successfully petition the Supreme Court to gain control of Mr Brown’s shares, those shares cannot be sold. Thereby Mr Brown could lose a substantial amount of money, all because his shares cannot be sold at the most appropriate time.

Further, what if Mr Brown was not an employee, but was a partner in a business partnership. Until there was a successful petition to the Supreme Court with respect to the partnership assets, the other partner would be unable to make any payments or sign any documents without the countersign of Mr Brown. Quite obviously this could also lead to the deterioration of goodwill and the profitability of a partnership.


The Benefits Of An Enduring Power Of Attorney

The problems identified in the preceding paragraph could have easily been overcome by an Enduring Power of Attorney executed by Mr Brown in Mrs Brown’s favour. Mrs Brown would have been able to sell the house and sign any of the personal cheques and/or make decisions with respect to the shares and partnership.

Furthermore, Mr Brown may have elected different persons to control the different assets.

For example, with respect to the shares, Mr Brown could have nominated his share broker who is an expert in the field to act as his attorney with respect to his share portfolio. Therefore in this case the effect of the Enduring Power of Attorney would be to release Mrs Brown from possible financial burdens and enable Mr Brown’s financial affairs, despite his medical problems to continue under the control of someone he knows and trusts.

In such a scenario, it would be disastrous if a family not only had to deal with such a tragic accident, but was also financially handicapped. It has happened to others, and it may happen to you.

In the Creation of Your Legacy: give your loved ones total peace of mind by executing an Enduring Power of Attorney.

Download the Enduring Power of Attorney Application form