Natalie was very excited to have signed a contract for the purchase of her first home.  She had saved a good deposit and had organised to borrow what she needed to complete the purchase.

Travelling home from work one night, a week before settlement, she was hit by an out-of-control car, and injured badly enough to be hospitalised for 2 months.

All the usual pre-settlement tasks were beyond Natalie … signing her mortgage, arranging insurance, and arranging for the transfer of her remaining funds to her lawyers for settlement.

Eventually alternative arrangements were made, at considerable expense, well after the due date for settlement, but not before she had incurred heavy default interest under the purchase contract for settling late … and a lot of grief.

The simple step of putting in place an Enduring Power of Attorney would have avoided all the problems, and would cover a situation where she was incapacitated or unavailable, e.g. while travelling overseas.

An Enduring Power of Attorney (EPOA) is a document which allows a person to nominate who can make decisions about their property and/or their personal welfare if they become mentally incapable, or in some cases also when they are capable, but are unable to act.  For example, if a person has a stroke, their attorney can assist with choices regarding health care and also can sign cheques, pay bills and if necessary buy and sell property on behalf of that person.

Recently there have been changes to the law relating to EPOAs, in response to many complaints involving the abuse of EPOAs.  There have been several cases where an attorney has taken the person’s assets and left them with nothing, with no reference to the person or the rest of the family.

These changes have been made to protect clients when an Attorney takes over their affairs.  Clients can now be far more specific about what they want in their EPOA.

There are two types of EPOAs.  One relates to property (land, investments, and bank accounts) and the other relates to personal welfare (medical decisions, rest home choices, etc).  A person can have more than one Attorney acting for them on their property affairs but only one Attorney can act on personal welfare matters.  They need not be the same person.

Property EPOAs

A person (the Donor) can choose:

1. Whether a Property EPOA will be used when they are mentally incapable or capable.
2. Whether to appoint one or two (or more attorneys) and whether they can act alone, or whether they must make joint decisions.
3. Whether to limit the property the Attorney can deal with (e.g. only real estate).
4. Whether to put in any conditions.
5. Whether the Attorney must consult a particular person before they do anything.
6. Whether the Attorney must provide information to anyone in particular.
7. Whether the Attorney can make a new Will for the Donor.
8. Whether to place restrictions on the Attorney.
9. Whether the Attorney can benefit themselves (payments, gifts).

Personal Care and Welfare EPOAs

This EPOA only operates if a person is “mentally incapable”.  Many of the same options which are in the Property EPOA are also in the Personal Care and Welfare EPOA.

What is the Attorney’s Role?

The Attorney must act in a way which is in the best overall interests (not just financial) of the Donor, and must encourage the Donor to develop competence to manage their own affairs.  The Property Attorney must also assist the Personal Care Attorney in terms of financial requirements.  Records of all financial dealings must be retained and provided to any person specified as entitled to that information in the EPOA.

What does “mentally incapable” mean?

The new legislation assumes a person is competent until proven otherwise.  For the purposes of the Property EPOA “mental incapacity” is when a person is “not wholly competent to manage their own affairs in relation to their property”.

In relation to Personal Care and Welfare EPOAs, this is when a person lacks capacity to make decisions about their welfare, or understand the nature of those decisions, cannot foresee the consequences of these decisions, (or failure to make decisions), or lacks the capacity to communicate those decisions.  A GP or doctor, whose practice includes assessment of a person’s mental capacity, can make this assessment.  Some people specify which doctor, or how many doctors are required.

Who should be the Attorney?

The Attorney must be over 20 years old, not bankrupt, and must be mentally capable.  It is extremely important that the Attorney has the skills to make decision and exercise good judgment.  There are obligations on Attorneys which if neglected can result in a fine.

If you need an EPOA but do not have one, the alternative will be for your next of kin to make an application to the Family Court to have someone appointed to act on your behalf.

The downside of this is the time and cost of going to Court, and also the fact that the person appointed to be your attorney may be someone who you would not have chosen yourself.