A Power of Attorney has been a critical estate planning tool for many years. This legal document enables you (the Principal) to appoint a trusted person(s) to temporarily manage your financial affairs if you are unable to do so due to injury, illness or travel. Referred to as the Attorney, this carefully chosen person(s) must be over 18 years old.
Importantly, there are two forms of Power of Attorney. It’s vital that you understand the key difference between Power of Attorney and Enduring Power Of Attorney. That way, you can ensure you have the right protection in place when it matters most.
What is the difference between Power Of Attorney and Enduring Power Of Attorney?
The primary difference between a Power of Attorney and an Enduring Power of Attorney is that the latter continues to have effect after you have lost the mental and physical capacity to make decisions. In contrast, a general Power of Attorney ceases when you can no longer do so.
Note that both documents are deemed invalid upon your passing. At this time, the Executor nominated in your Will is responsible for administering the deceased estate.
To help you better understand the two types of Power of Attorney, we explain both documents in detail below:
What is a General Power Of Attorney?
A General Power of Attorney permits an appointed person(s) to manage your financial assets – including bank accounts, shares and property- on your behalf when you cannot due to temporary illness, injury or absence.
This legal document does not permit the Attorney to control your health or lifestyle choices. Rather, these decisions must be made by an Enduring Guardian. Additionally, General Power of Attorney ceases to take effect if you lose the physical and mental capacity to make your own decisions.
What is an Enduring Power Of Attorney?
Unlike a General Power of Attorney, an Enduring Power of Attorney is a legal document that permits an appointed person(s) to manage your financial affairs when required and continue to do so after you lose the physical and mental capacity to make your own decisions.
As whoever you decide to appoint will have considerable control and responsibility over your finances, an Enduring Power of Attorney document must meet further requirements:
- It must clearly state your desire for the powers to continue after you no longer demonstrate mental capacity
- It must be signed by your attorney to confirm his or her consent
- It must be signed by a prescribed witness (usually your solicitor), who will also need to sign a certificate declaring that they have explained the Enduring Power of Attorney to you and that you seem to understand it
Despite only 11% of Australians having a valid Enduring power of Attorney in place, we strongly recommend this course of action for anyone wishing to safeguard their best interests in all circumstances.
Get tailored advice on appointing Power of Attorney in WA
Now that you know the difference between General Power of Attorney and Enduring Power of Attorney, it should be clear that they are both valuable estate planning instruments. As you can determine the scope and limits of each, you should consider your situation carefully and obtain legal advice before making an appointment.
Note that you are unable to appoint Power of Attorney or Enduring Power of Attorney if you have already lost mental capacity. At Affinitas Legal, our trusted lawyers can assist you in appointing Enduring Power of Attorney while you still can. Please get in touch with our Estate Planning team for personalised support.
