Enduring Power of Attorney's Explained

An Enduring Power of Attorney (‘EPA’) is a legal arrangement governed by the Protection of Personal and Property Rights Act 1988 whereby one person (‘the donor’) authorises another person (‘the attorney’) to act on their behalf. An EPA can, depending on the donor’s wishes, either grant the attorney wide general rights or rights limited by conditions and restrictions imposed by the donor.

EPAs have in recent years become subject to much tighter controls, with stringent mandatory requirements imposed by The Protection of Personal and Property Rights Amendment Act 2007 (‘the Act’), which came into effect on 26 September 2008.

The two types of EPAs are:

EPA in relation to personal care and welfare – a donor may authorise their attorney to act in relation to the donor’s personal care and welfare either generally or in relation to specific matters. These include matters such as medical treatment and selection/admission of the donor into residential care or a rest home.

EPA in relation to property – a donor may authorise their attorney to act in matters concerning the whole or a specified part of the donor’s property. Unless restricted, this EPA can be used for any ‘property’ of the donor, including borrowing, operation of bank accounts, and almost all financial or property decisions the donor could otherwise make personally.

Application

An EPA for property can be immediately effective and continue when the donor no longer has mental capacity, or can become effective only upon the donor’s mental incapacity. However, for a personal care and welfare EPA, an attorney cannot act unless the attorney believes on reasonable grounds that the donor is mentally incapable. For more significant matters, certification of mental incapacity from a relevant health practitioner or determination by a court is also required before an attorney is able to act. In any event, there is an automatic presumption that the donor is mentally capable until the contrary is proven.

Key Requirements for EPAs

Witnesses - a lawyer, registered legal executive or an offi cer of a trustee corporation independent of the attorney must explain the effects and implications of the EPA to the donor to ensure he or she fully understands the scope of authority being ceded to their attorney, provide certifications that this has occurred, and witness the donor’s signature.

The attorney’s signature cannot be witnessed by the same person and so a separate independent witness is required. This can be another practitioner from Turner Hopkins.

Consultation – changes under the Act also provide a donor with the ability to require their attorney to reasonably consult with or provide information to certain people named in an EPA before a decision is made. Despite such discussions, however, the ultimate decision will be at the attorney’s discretion. When a business goes into liquidation, the assets of the business are realised to repay as much of the debt as possible. Where there are competing creditors, the order in which they receive their share of any proceeds is determined by their ‘priority’.

Conclusion

While the Act endeavours to provide donors with greater control over the powers they yield to their attorneys, the ultimate decision making will rest with the attorney. It is therefore critical for a donor to carefully consider who may be a suitable attorney.

If you are considering an EPA, please contact Raechel Pedrotti from our office who will be able to discuss what powers are given to your attorney, and be able to prepare an EPA to best suit your circumstances.