Estate Planning - Enduring guardians & power of attorney
As estate planning lawyers we regularly speak to people about writing a will, power of attorney and appointing an enduring guardian. While most people have a good understanding of why it is important to write a will, power of attorney and enduring guardians are less well known.
ENDURING GUARDIAN AND PERSONS RESPONSIBLE
A guardian is someone that you choose to make decisions about your personal and health care if you can’t make the decisions yourself. It is different from a power of attorney – your attorney is appointed to make decisions about money, property, financial and other legal decisions.
The benefit of an appointment of enduring guardian is you get to pick who this is. If you don’t have an appointment of enduring guardian it doesn’t mean decisions won’t be made, it just means you don’t get to pick who will make them.
The Guardianship Act 1987 deals with who can consent to medical treatment on your behalf if you can’t. It creates a hierarchy for what’s known as your “person responsible”. In some ways, the hierarchy follows what people understand as “next of kin” but it is actually different.
If you’ve appointed a guardian, they are your person responsible. If you don’t have a guardian, your spouse will be your person responsible provided you are still in a close and continuing relationship with them. If you don’t have a guardian or spouse in a close and continuing relationship, any person who has care of you could be your person responsible. Finally, if there are none of the above, the person responsible could be a close friend or relative. There are rules around whether or not a person has care of you and what constitutes a close friend or relative.
All of this can be complicated, and most people don’t know about it. It also doesn’t deal with all the decisions that might need to be made. Appointing a guardian so you know exactly who is in charge is a much better option for most people.
Who can be a guardian?
You can pick anyone you like to be your guardian, as long as they are an adult and have decision making capacity. You can choose to appoint more than one guardian and you can decide if they can make decisions for you alone or they need to make decisions together. You can also appoint a substitute guardian, who can make decisions for you if your primary guardian passes away or doesn’t have capacity to make decisions for you.
Typically for a person who has a spouse and adult children, they appoint their spouse as primary guardian who can act alone and their children as joint guardian that have to act together.
What can a guardian do?
The other benefit of appointing a guardian is that you can chose what they can and can’t do. By appointing a guardian, you can also:
- Make decisions in advance and tell your guardian what you want them to do for you in certain circumstances. This makes your guardian’s job easier and saves them from the burden of making a difficult decision.
- Give your guardian directions about how they are to make decisions for you.
- Place limits on your guardian’s power.
- Give an authority so your guardian can access personal information from health and accommodation providers. Without that authority the Privacy Act can make it hard to obtain information.
POWER OF ATTORNEY
A power of attorney is an authority that is given by a person called the “principal” to an “attorney”. An attorney can sign documents and act for an on behalf of the principal. In effect, the attorney can make financial and property decisions on the principal’s behalf. An attorney can’t make personal decisions for the principal, for example about health, living arrangements and lifestyle.
The authority of an attorney is incredibly broad – the attorney can do almost anything that the principal can do. The attorney is required to act in the best interests of the principal and not consider any other person’s interests when making decisions.
There are some limits on the authority. The attorney can’t make a will for the principal. However, the attorney, can potentially make a binding death benefit nomination which is like a will for your superannuation. The attorney also can’t appoint another attorney to act for the principal. The attorney can’t act on behalf of a principal who is acting as a director / secretary of a company – the company must appoint its own attorney.
Picking the attorney
It is important that the principal trusts the person they are appointing as attorney without question. The attorney must be over 18 years old and must not be bankrupt or insolvent. If the principal has a complicated financial situation, the attorney should be someone who has the skills to deal with that.
Risks of appointing an attorney
Appointing an attorney isn’t risk free. The law is very clear about the attorney’s obligation to act in the principal’s interests only. However, due to the attorney’s very broad power, they can easily do the wrong thing. An attorney that does the wrong thing can be held liable for their actions, but a rogue attorney might cause a lot of problems before their conduct is discovered and stopped. There isn’t person or organisation that automatically oversees or audits the attorney’s conduct. The attorney also doesn’t need to ask the principal’s permission before they act. Once the appointment is made, and the appointment commences, the attorney can do things without telling the principal.
Who can be an attorney?
Like with a guardian you can pick anyone you like to be your attorney, as long as they are an adult and have decision making capacity. You can choose to appoint more than one attorney and you can decide if they can make decisions for you alone or they need to make decisions together. You can also appoint a substitute attorney, who can make decisions for you if your primary attorney passes away or doesn’t have capacity to make decisions for you.
Again, like with a guardian for a person who has a spouse and adult children, we often see them appoint their spouse as primary attorney who can act alone and their children as joint attorney that have to act together.
Types of appointment
There are 2 types of power of attorney:
- an ordinary or general power of attorney. With this type, the power ceases when and if the principal loses his or her mental capacities
- an enduring power of attorney. With this type, the power continues if the principal loses his or her mental capacities.
Limits on the power
When appointing an attorney, a principal can put limits on their power. For example, the principal might decide that they don’t want the attorney changing their superannuation nominations.
Commencement
The principal can decide when the power commences. It might be:
- immediately on the power of attorney being accepted;
- some specific date
- when and if the attorney considers the principal has lost their capacity to make decisions.
- when the attorney has lost capacity to make decisions and a doctor provides a certificate to that effect.
The last two only apply if it is an enduring power of attorney.
What if you don’t appoint an attorney?
If you don’t appoint an attorney and you can’t make decisions for yourself, things can be very difficult for your family. It’s not the end of the world, but in order to do things for you, your family or other person would need to make an application to the Guardianship Tribunal to be a Financial Manager. A Financial Manager has a similar kind of authority as an attorney. The difference is that it is a slow and potentially costly process to become a Financial Manager and they are subject to ongoing scrutiny and reporting obligations.
WHERE TO FROM HERE?
Come talk to us about appointing an attorney and an enduring guardian. Click here to get in touch.
A FINAL WORD – LEGAL COSTS
We always meet with new clients at no cost to get to know you and your needs (and for you to see if we are right for you. We are a fixed fee firm and will give you a quote for the cost of appointing an enduring guardian and the cost of a power of attorney, before we do your work – so there are no surprise fees.