Life is full of unexpected twists and turns. While we often plan for milestones like buying a home, starting a family, or retiring, we don’t always think about the what-ifs – what if you were unable to make decisions for yourself due to illness or an accident? Who would step in to manage your finances, pay your bills, or make medical decisions on your behalf?
This is where a Power of Attorney (POA) becomes essential. It’s a relatively simple yet powerful legal document that ensures your affairs are handled by someone you trust if you’re ever unable to make decisions for yourself. Yet, many people put off setting one up, often until it’s too late.
What is a power of attorney (POA), and why do you need one?
A Power of Attorney is a legal document that gives a trusted person (your attorney) the authority to make decisions on your behalf. These decisions can cover financial matters, property management, and even personal or medical care, depending on the type of POA you put in place..
Many assume that their spouse or next of kin will automatically be able to take over if something happens to them, but that’s not the case. Without a POA, your family may have to go through complex legal processes just to gain access to your finances or make necessary decisions. This creates additional stress for your loved ones during a time of grief.
Having a POA in place ensures that:
- Someone you trust is legally authorised to handle your affairs.
- Bills, loans, and essential financial commitments don’t get neglected.
- Your assets are protected, and decisions are made in your best interests.
- Your medical preferences are honoured if you’re unable to communicate them.
It provides financial security, but also peace of mind knowing that your affairs will be managed according to your wishes.
Types of power of attorney (POA): which one do you need?
There are different types of POAs, each serving a specific purpose. Understanding the options can help you determine which is right for your situation.
1. General Power of Attorney
A General POA grants someone the authority to act on your behalf for financial and legal matters, but only while you have mental capacity. If you become incapacitated, this POA has no further operation.
This is often used for temporary situations, such as if you’re travelling overseas where you may need someone to handle financial transactions in your absence.
2. Enduring Power of Attorney (EPA)
Unlike a General POA, an Enduring Power of Attorney remains in effect even if you lose mental capacity due to illness or injury. This is the most common and important type of POA for long-term planning, making sure that a trusted person can continue managing your finances if you are unable to.
An enduring power of attorney (EPA) can cover:
-
- Financial matters: managing bank accounts, paying bills, handling investments, or selling property if needed.
- Property management: overseeing your real estate assets, mortgage payments, and maintenance.
- Health and Lifestyle decisions such as which medical professionals you see, where you live and who you interact with.
3. Medical Power of Attorney
A Medical POA allows someone to make medical decisions on your behalf if you’re unable to do so. This can include choices about medical treatments, surgeries, and end-of-life care.
If you have strong preferences about your healthcare, a Medical POA will make sure that your wishes are respected, rather than leaving critical decisions up to doctors or family members who may not know what you would have wanted.
What happens if you don’t have a POA?
Many people put off setting up a power of attorney, thinking they’re too young or that they’ll “get around to it later.” But, accidents and illnesses can happen at any time. If you become unable to make decisions without a POA in place, your family may have to go through costly and time-consuming legal proceedings to be granted decision-making authority.
Without a POA:
- Your bank accounts and financial assets may be frozen.
- Bills and mortgages may go unpaid.
- Medical decisions may be made without your input.
- Family members may disagree about who should take charge, leading to potential disputes.
Organising your POA is a simple, proactive step that can prevent unnecessary stress and complications down the road for you and your family.
When should you set up a power of attorney?
The best time to set up a Power of Attorney is now. Anyone over 18 years of age with financial responsibilities should consider having a POA. Life is unpredictable, and waiting until it’s needed may be too late.
You should also review and update your POA periodically, especially after major life events such as:
- Getting married or divorced
- Buying a house
- Having children
- A change in financial status
- A decline in health
How to set up a power of attorney
Setting up a POA is easier than many people think. Here’s how to get started:
- Choose someone you trust: this could be a spouse, child, other family member, or close friend who understands your values and financial situation.
- Determine the right type of POA: depending on your needs, you may need a General POA, Enduring POA, or Medical POA.
- Consult a legal professional: a lawyer can help you draft and formalise the document to ensure it meets legal requirements.
- Discuss your wishes: have an open conversation with your chosen attorney so they fully understand your preferences and responsibilities.
- Review and update regularly: make sure your POA remains aligned with your current circumstances and relationships.
Take control of your future
A Power of Attorney is one of the most important documents you can have in your estate plan. It’s not about planning for the worst. It’s about being prepared, protecting your loved ones from unnecessary stress, and ensuring that your financial and medical decisions are handled according to your wishes.
If you have questions or need help setting up a POA, our friendly legal team is here to guide you through the process.
Written by APS Wills & Estates Principal Lawyer Phillip Lambourne
Phil is a lawyer with over 35 years of experience in private practice and over 25 years of experience in the trusts and estate planning area. As Principal Lawyer with APS Wills & Estates, Phil provides advice and prepares documentation in the areas of Wills, Powers of Attorney, Probate and Estate Administration for clients across Australia. He also provides clients with conveyancing and property law, commercial law and state tax advice services. When Phil isn’t working, he enjoys spending time with family, reading new books, and watching new shows with some good scotch whisky, red wine and cheese. Phil also enjoys playing trombone in the Melbourne Lawyers Big Band!