O'Donnell Kerr Financial Planners
  • 05 June, 2019

Powers of Attorney - A quick lesson and overview

A power of attorney is a formal document giving another person the authority to make personal and/or financial decisions on your behalf.

There are two types of powers of attorney

  • General power of attorney

  • Enduring power of attorney

The main difference between the two is that an enduring power of attorney will still have an effect even after a person loses capacity to make decisions, whereas the general power of attorney ends when a person loses their capacity to make decisions.

A person may appoint a single or joint attorney.  Joint attorneys can provide a degree of security or could be cumbersome and difficult to administer especially if the joint attorneys have a disagreement or do live a long way from each other.

The power of attorney document can specify over what decisions the attorney is able to make – personal, financial or both. A person can also revoke the enduring power of attorney at any time while they do have capacity.

So, making an appointment and deciding who the attorney will be is an extremely important decision and not one that should be made in haste or without a full understanding of the control and power this person can exercise over your life.

I am my mum’s single enduring power of attorney and it is a role I take very responsibly.  I was appointed after consultation and a lengthy discussion with mum and with my brother and sister’s full agreement.

I understand that as an attorney I must act honestly, diligently and in good faith; avoiding any conflict of interests in relation to the financial decisions I make on my mum’s behalf and my own circumstances, or my brother’s and sister’s interest.  My mum’s assets and property need to be kept separate from my own.

Too many times I have heard of or seen attorney’s making decisions which benefit themselves and not the principal – the person who appointed them attorney.

The most common area of conflict I see relates to a person entering aged care, where the attorney, which in nearly all cases is a child, making decisions in relation to mum or dad’s former home. 

Instead, of considering the most beneficial decision, taking into account mum or dad’s circumstance, consideration is given to what would be best from an estate planning aspect.  In other words, would the beneficiaries of the ‘will’ be better served by not selling the home or selling the home to their children at less than market rate.

As an attorney and possibly a beneficiary of the estate this is a conflict of interest and can be seen as an abuse of your authority if you are seen to be not to acting in the best interest of the principal – mum or dad.

I am very careful to keep all financial transaction records separate and I constantly consult with the remainder of my family concerning any issues which can affect my mum’s life and circumstances.

As an attorney I am not entitled to any remuneration from the principal unless this has been authorized in the enduring power of attorney.

If you are interested in understanding the obligations of an attorney or looking to appoint an attorney (unfortunately, I am not able to direct you to one website every state does have their own form and set of guidelines),  my suggestion is to “google” power of attorney and your state to find the appropriate information.

Enduring power of attorney is an important and helpful instrument as you grow older, but as I have mentioned earlier, a lot of consideration and thought is required before the action of appointing an attorney is taken.

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