As life expectancy has increased, so has the number of people suffering from memory loss from conditions such as dementia and Alzheimers. So, have you ever wondered what would happen to your farm if you came down with a mental illness resulting in memory loss and judgement? What if your spouse loses his/her mental capacity?
Naturally, somebody has to act on your, or their, behalf. Without a financial power of attorney being in existence, nobody has the immediate power to make financial decisions.
A financial power of attorney is a written authority whereby the donor gives another person (the attorney) the power to manage their financial affairs.
Your attorney must always act in your best interests and where there is a conflict of interest, your attorney must make your interest first priority.
There are a number of advantages in granting an enduring financial power of attorney. These include facilitating the immediate management of the incapacitated person’s affairs. Having such a document could avoid a possible family dispute over who is to look after the donor’s finances. The power of attorney could be used to retire the affected person from the farm business and the transfer of land.
If you are a director of a company, your attorney cannot act in this capacity on your behalf. Yet another advantage is that the cost of preparing or revoking the financial power of attorney is relatively cheap.
You should only appoint someone who you trust absolutely. You can appoint more than one person but you must spell out whether they should all act together (jointly) or whether any one of the attorneys can act on your behalf (severally).
Unless you specify when the attorney can act, such as a specific date or event, the financial power of attorney applies the moment it is signed.
The person, or persons, you nominate must be over 18 and willing to accept the responsibility. Typically, the attorney does not get paid for his or her services.
Laws governing the granting and administration of powers of attorney differ from state to state, and there have been changes made in Victoria in the last 6 months. One of these changes now prevents a care worker or an accommodation provider from acting as an attorney. There are also new rules around who can witness the signing of powers of attorney.
If there is no financial power of attorney granted, then a family member(s) has to make application to the Victorian Civil and Administration Tribunal (VCAT) to be appointed as your attorney.
This could lead to a family dispute as to who should be appointed. It will be time-consuming and stressful because the applicant may have to appear at VCAT, and it could also be costly.
If no application is made, VCAT could appoint the public trustee to manage your affairs.
A medical power of attorney can also be donated to a person to make decisions about health care and medical treatment.
The law only allows one person to be your medical power of attorney. An alternative attorney can be nominated in the same document. Where there is no spouse for instance and more than one child, this power may place the nominated child in a difficult position when making health decisions on behalf of a very sick parent.
The reality is that the population is living longer, and many more people are suffering from memory loss, such as dementia and Alzheimer’s.
Granting a financial power of attorney should always be a key ingredient of everybody’s estate plan.
Important: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur rapidly. We, therefore, recommend that our formal advice is sought before acting.