Power of Attorney vs Enduring Power of Attorney

People never want to think about the worst-case scenarios in life, particularly when it comes to something happening to them. However, having that Plan B in place will provide peace of mind in knowing things will be taken care of should the worst occur.

A Power of Attorney is one such document that helps to manage these scenarios. Alarmingly though, a 2007 enquiry estimated that only 11% of Australians have such a document in place.

This may be due to people misunderstanding their purpose, a lack of desire to consider their future mental incapacity, or the process being too complex, particularly given that different types of Powers of Attorney exist.

What is the difference between Power of Attorney and Enduring Power of Attorney?

The two most common forms of these documents are a Power of Attorney (sometimes called a General Power of Attorney) and an Enduring Power of Attorney.

The differences between these documents are in the scope of their application. An Enduring Power of Attorney applies from the date of signature and acceptance and remains valid past the person’s mental incapacity. In contrast, a General Power of Attorney is restricted by only being valid for a certain period or transaction. An Enduring Power of Attorney offers people a simple and effective way to make arrangements dealing with personal matters, finances, or health decisions should they lose mental capacity.

Duties

The duties imposed upon a General Power of Attorney are limited, given the scope is restricted, e.g., limited to a house purchase or whilst overseas. Therefore, those duties are usually not comprehensive and have a defined endpoint.

In contrast, an Enduring Power of Attorney has an almost limitless scope of duties. As a rule of thumb, such a document is not utilised without the consent of the original person whilst they retain mental capacity. But, upon this loss of capacity, an attorney may step in to begin to manage your financial affairs. The document essentially provides the attorney with “the authority to do on behalf of the principal anything that the principal may lawfully authorise an attorney to do”.

The key takeaway is that the duties you can impose are discretional and flexible. You can tailor your document to allow your attorney to do what you’d like while also ensuring they cannot do things you don’t wish them to do.

How long do they last?

The duration of a General Power of Attorney is always whilst a person has capacity and may be restricted as desired by the document’s wording.

Conversely, an Enduring Power of Attorney is usually in force from when the appointment is accepted and remains valid past a person losing capacity.

One similarity between these documents is that both cease upon the death of the appointor.

Appointment process

The process is much the same whether you appoint a General or an Enduring Power of Attorney. After consulting with a solicitor, the document will be drafted and includes your wishes and instructions.

Once the solicitor has confirmed you understand the contents and have capacity, your attorney(s) may accept their appointment from this point forwards; they may accompany you to this original appointment or accept later on.

Real life examples

There are many examples of the importance of executing valid and appropriate Powers of Attorney before you need them. Etta James, an American blues, jazz and R&B artist who sang You’ve Got A Hold On Me, is one such example. Only in the year that she was diagnosed with Alzheimer’s, did Ms James also appoint her son as her Power of Attorney. This appointment consequently ignited a legal battle between her son (of a previous marriage) and her husband.

The family members contested Ms James’ capacity to execute this document and who was the appropriate person to represent her interests. Although a US-based example, Ms James’ situation and the ensuing costs and publicity her family endured emphasise how crucial it is to put your affairs in order early.

Moving closer to home, it’s clear that having a Power of Attorney in place, particularly an Enduring Power of Attorney, is crucial. If this document is subject to a dispute or has not even been drafted, the New South Wales Civil and Administrative Tribunal (NCAT) will likely be the forum for resolving disputes.  

The ruling of Holt V Protective Commissioner (1993) outlines the myriad of issues that may arise regarding an Enduring Power of Attorney. A complex family situation, compounded by allegations of undue influence upon the person, culminated in lengthy and costly hearings. Ultimately, NCAT appointed one family member as financial manager, under the purview of the New South Wales Trustee and Guardian, along with several obligations and duties subject to regular review. Such a hearing and outcome is in no one’s best interest, yet it is all too common.

Get legal advice on the best option for your needs

It can, however, be avoided with the early implementation of an Enduring Power of Attorney complemented by clear communication with family so that if a person ever loses capacity, the plan is already in place.

This is naturally best-implemented with the advice and assistance of a qualified, experienced solicitor. Our team at Turnbull Hill Lawyers can act upon your instructions and safeguard your future welfare through the execution of a valid and appropriate Enduring Power of Attorney.

It cannot be understated how important it is to get it done right and to get it done early.

Contact us if you feel like ticking another item off your to-do list.