Power of Attorney – Why you need one.
When I meet with new clients, we spend time establishing their current situation. We go through their life goals, income, expenses, assets and liabilities. We also talk about their health and insurances. All pretty standard information. We also touch on Estate Planning. As I have written about in the past, an important part of financial planning is not only asset accumulation and asset protection, but what happens to your assets when you pass away.
The majority of clients can tell me that they have a will in place to address their estate. But, is it often the next question that stumps them:
“What plans do you have in place if you are no longer able to look after yourself”
What is a Power of Attorney
With advances in modern science, it is becoming more common for people to live through major medical episodes. We are now living through heart attacks, cancers and strokes, which once may have killed us. However we don’t always come out completely 100%.
In such situations, we may lose the capacity to properly manage our finances and look to others to assist. We may give a person (or organisation) the legal authority to act on our behalf in any (or restricted) financial and legal matters. We grant them Power of Attorney (POA).
Why get a Power of Attorney?
You may wish to appoint a POA if you foresee an issue managing your finances. This may be over the short term, like being overseas, or for the longer term. A POA can make financial decisions for you like operating bank accounts, making investments or signing legal documents.
Types of Power of Attorney
Enduring Power of Attorney: allows you to appoint a person(s) to manage financial and legal decisions on your behalf and continues even if you lose the ability to make decisions for yourself.1
General Power of Attorney: allows you to appoint a person(s) to manage financial and legal decisions on your behalf, only while you have the ability to make your own decisions.1
You may grant a General POA in instances where you cannot be present yourself. Such as going overseas and having to settle a property while away. They are usually made for a specific reason or time period. However, unless you stipulate otherwise, it will last to your death or to a time you are incapacitated.
Considering what your POA can do, this person would not only have to be trustworthy, but also competent enough to take on such responsibility. It is an important decision that should not be taken lightly. You should also discuss this with your potential Attorney to make sure they are willing to take on such responsibility.
What about Medical Decisions?
In NSW a POA can be appointed only to make financial decisions on your behalf.
In order to make any lifestyle or medical decisions on your behalf you have to appoint an Enduring Guardian.
Which one do I need?
As a POA is a legal document you need to approach a legal professional to complete one. The type of POA you establish is dependent on your needs. Your legal professional can assist you with the most suitable POA for your situation.
The NSW Trustee and Guardian also provide a low-cost service to establish a POA. If you do not have anyone you think is suitable to be your POA, they will also fill this role for a fee.
Making sure you’re financially sound is not only about having funds, but managing them properly too. At some stage most of us will lose the capacity to make decisions for ourselves. Planning what to do when this time happens is an important part of a sound financial plan.
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The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. Louella Jorge is an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser before you act.