Difference Between Power of Attorney and Enduring Power of Attorney
One very common question asked of lawyers, is what’s the difference between a Power of Attorney and Enduring Guardianship. The answer is partly to do with where you live.
Difference Between Power of Attorney and Enduring Power of Attorney
A Power of Attorney sometimes referred to as a General Power of Attorney is a legal document that gives authority to a person to make financial decisions on your behalf.
So, in effect a Power of Attorney allows you to delegate the management of your affairs, preferably to someone you trust for usually a specific period of time.
Practically speaking, let’s say you’re heading overseas for a trip for 6 weeks and you want someone here in Australia to be able to conduct financial arrangements on your behalf. In this case, you’d consider a Power of Attorney. Some of those financial arrangements may include the buying or selling of real estate through to voting on your behalf at a meeting.
Now, where it gets interesting is that the term Power of Attorney is sometimes wrongly considered to do things that it has not the authority to do.
Very importantly a Power of Attorney does not give the delegated person authority to make decisions with respect to personal, lifestyle or medical decisions. Also, in the event that the person giving authority loses their capacity, the active Power of Attorney ceases immediately.
For example, you have been given authority via a Power of Attorney on behalf of your father to conduct financial transactions on his behalf while he’s traveling around Australia. Sadly he’s involved in a car accident and suffers a brain injury and is deemed now not to have mental capacity to make decisions. The Power of Attorney you hold now holds no effect.
Enduring Power of Attorney or Enduring Guardian
An Enduring Power of Attorney (QLD) or Enduring Guardian is a legal document that gives a person authority to make person, financial and health decisions when the person giving such authority lacks the capacity to make those decisions.
What About Medical Decisions?
Depending upon which state you live, it may be the case that you will require a separate document to give authority for medical decisions. For example, in Queensland this document is called an Advanced Health Directive and it deals with giving a person authorisation to make medical decisions in the event that the relevant person cannot make them.
In Victoria, a medical power of attorney gives a person the right to delegate authority to another to make decisions on the medical treatment, such as agreeing to or refusing surgery. In contrast, in New South Wales an Enduring Guardianship gives an Enduring Guardian authority to make health (including medical) and lifestyle decisions for the relevant person.
What Happens When You Lose Capacity Without These Documents in Place?
Put bluntly, it’s a mess! Any lawyer who does this work will tell you the war stories when there is no authority and you have to wait for a tribunal to appoint a person to make those decisions. This is particularly stressful for families when decisions need to be made quickly.
When a person loses capacity and there is no legal delegation in place there are different processes in each state of Australia that will in effect seek to appoint such a person. This process is usually by way of a hearing conducted by a court or tribunal or board. In each state, there are different nuances to how they all operate, but essentially they all have one common objective and that is to appoint a guardian to make the decisions.
Remember, the last place you really want to be is in a predicament where decisions need to be made, but because you have not taken care of these relevant documents, you’re now in limbo waiting for a tribunal or court to find a date to determine guardianship.
In Queensland, similar in other states, for a person to apply to the relevant tribunal to become an administrator/guardian of the person who has lost capacity, they must:
- be over the age of 18;
- not be a paid carer or health provider for the person;
The relevant tribunal will also look at matters relating to:
- ensuring that the proposed administrator/guardian understands and respects the principles in Guardianship Law;
- be free of conflicts of interest regarding the affairs of the person you’re applying to take care of;
- is compatible in terms of culture and communications with the adult;
- is available and accessible;
- has the competency to carry out the functions of Administrator and Guardian.
It goes without saying that matters that may go against an appointment may include:
- a criminal record;
- a previous removal from appointment as an Attorney or Guardian; or
What Happens If No One Wants to Do the Job or isn’t Appointed?
In circumstances where there either may be no one in a person’s life who can take on the guardianship role, or if the nominated person has fallen foul to the tests above, then the tribunal will look to an independent party. In New South Wales for example, in the event that the tribunal finds that no‑one is appropriate to be appointed, it may appoint the Public Guardian who will then manage the affairs. This is similarly the case in other states of Australia.
Do I Need a Lawyer for a Power of Attorney or Enduring Power of Attorney.
The simple answer is “no.” You can download these documents on relevant government websites in your state. However, as you would expect, we encourage people to look at these documents in the context of your wider “estate planning.”
Whilst the term “estate planning” sounds very grandiose, its applicability to all walks of life is very important. For example, a young trade who heads to Bali with his mates and is involved in a motorcycle accident (as many are) and loses his life, can have substantial assets, not necessarily those that you see. A young tradesman can have potentially hundreds of thousands of dollars in both super and insurance policies. Not to mention of course, that superannuation, unless there is a nomination by the policy owner, does not automatically fall into the estate. But, that’s a topic for another day.
What I’m trying to press here is don’t think for a minute that estate planning is just for the wealthy. In this context, looking at your total estate plan, including will, trusts (if necessary) and documents like Powers of Attorney, Enduring Powers of Attorney etc all should form part of a conversation with an experienced estate planning lawyer.
Who Should You Choose to Be Your Power of Attorney?
The decision of appointing a Power of Attorney of all types is a fundamentally important one, no less than the person who you would give authority to act as an executor in your Will. Accordingly, think hard about the best person to undertake this role should it ever be required.
In this regard, regardless of which state of Australia you are located, the law governing an appointment of an attorney imposes very high standards of conduct on the attorney. The attorney owes to the person who made the delegation a “fiduciary duty.” A fiduciary duty is a duty to act always in the best interests of the other. In the context of being an Enduring Power of Attorney, the delegated person must always have the best interests of the person of whom they represent at all times.
It is often recommended that you don’t just appoint one attorney to act open your behalf, but rather you appoint two. In practice what this will mean is that these two people need to act jointly and of course in doing so, keep each other in check and ensure that both of them uphold their fiduciary duty.
If you have no one that comes to mind readily to act in such a position, or you believe that family members would not act in your best interests or there is significant conflict in your family, the appointment of a lawyer or accountant can make a lot of good sense.
These types of conversations, when considering your estate plan will always form part of a consultation with an experienced estate planning lawyer.