Power of Attorney is a legal authorisation that you (called the Principal) give to another individual to execute financial transactions or enter into financial agreements on your behalf when you are not able to do the same yourself. This inability could be due to something as simple as you being out of town when the need arises or a more complicated situation like you becoming mentally incapacitated at a later time.
It is important to understand that the individual to whom you give this authority (called an Attorney in this context) will have the right to enter into financial contracts and agreements on your behalf and these agreements will have all legal validity and will be binding on you just as if you have done it yourself. It is therefore very important that you make only a very trusted person your Attorney. Depending upon the scope and the duration you have two options (ordinary and enduring) when it comes to a Power of Attorney document.
An ordinary or general Power of Attorney is good when you want to give authorisation for a short term purpose. For example, you want to sell your property and right now there is no buyer and you have to go abroad for a few months. You can give a trusted person an ordinary Power of Attorney. This allows the person the ability to sign documents on your behalf to complete the sale in your absence if you get a buyer. This type of Power of Attorney is valid only as long as you are mentally capable. In case you lose your mental capacity, this authorisation automatically terminates.
Enduring Power of Attorney
The other type of Power of Attorney is the enduring Power of Attorney. This kind of Power of Attorney which has some extra requirements continues to be valid even if you lose your mental capacity or lose your ability to make judgements due to a condition such as dementia.
It makes a lot of sense to give someone the Power of Attorney in NSW if you foresee a situation where you will not be available to manage your finances. This way, there will be no need to keep your important financial transactions pending due to events such as travel, hospitalisation or other situations where you cannot physically take care of these things yourself. Because the person can sign forms on your behalf, you don’t have to take the stress of keeping your legal work pending due to your unavailability.
Making somebody your Power of Attorney in no circumstance affects your rights to perform any of these transactions yourself as long as you don’t lose your mental capacity. It is important to understand that once you lose your mental ability you become incapable of entering into legal transactions. This includes your ability to give someone the Power of Attorney. So it is best to do this before such a situation arises.
The Power of Attorney in NSW only allows the Attorney to act in matters related to finance. The attorney cannot legally make decisions related to health, vote or make other personal non-financial decisions. If you foresee a situation where you will need someone else to make such decisions on your behalf, you must appoint an Enduring Guardian.
The Power of Attorney act 2003 does not transfer any rights you may have as a trustee to your Attorney. Your Attorney cannot use your assets to make gifts to someone or use it for his or her own benefit unless the Power of Attorney document specifically allows such actions.
The law requires your Attorney to use this authority correctly, failing which your Attorney may be held liable for any loss that may occur due to any incorrect action. You can revoke the Power of Attorney at any time provided you are mentally capable. In NSW there is a specific form to revoke the Power of Attorney. In case of a dispute relating to the use of Power of Attorney which requires legal remedy then such cases can be decided only at the Guardianship Tribunal or the Supreme Court.
The use of a NSW Power of Attorney in other states may involve additional requirements. It is best to check with a lawyer in that state to make sure that these are met. Other countries have their own legal requirements and so it is best to consult a lawyer in that country. In any case it is best to consult a lawyer before appointing a power of attorney so that it is worded correctly and you understand all the implications and limitations.
Contact us here at Aaron Legal for help and advice regarding all types of Power of Attorney.