subject: How A Power Of Attorney Works [print this page] When you have a valid Will in place you know that your estate can be administered efficiently after you die. However, if you lose your mental capacity to make decisions before you die, what happens to your everyday affairs? Well, quite simply, if you don't have a Power of Attorney in place and if you are deemed to be mentally incapable of taking care of your affairs, then it will be left to a court to make decisions for you and this generally means that your bank accounts and investments will be placed in the hands of a bureaucrat to administer on your behalf.
This can cause a lot of angst to the remaining family members, and your wishes may not necessarily be carried out.
There are several types of powers of attorney which empower others to make decisions on your behalf. In the first place a general Power of Attorney is used to appoint somebody to make financial and legal decisions for you, usually for a specific period of time. This allows you to appoint someone to sign contracts, for example, whilst you are travelling overseas or are otherwise unavailable. If you later lose legal capacity however, the general Power of Attorney ceases to operate.
The second type is called an enduring Power of Attorney, and is generally used to appoint someone to make financial, legal, or medical treatment decisions for you in the event of you losing the capacity to make these decisions for yourself.
With an Enduring Power of Attorney and a General Power of Attorney, you can appoint joint decision makers and stipulate, if you wish, that both of them have to agree for their decisions to be valid.
Anyone empowered to sign a document under a Power of Attorney should always exercise caution when doing so. In the case of an aging parent, for example, it is important to be aware of the provisions contained in the person's Will, so that any decisions do not impact upon the person's intentions with regard to their estate.
This could make the difference in deciding whether to sell a property to fund a bond for a retirement village, because the Will may contain specific provisions regarding the sale of the property.
For this reason it is important for anyone giving a Power of Attorney to a family member to make them aware of any provisions in their Will, or alternatively to make changes to their Will so that the estate can still be administered in accordance with their wishes.
When deciding who will be granted the Power of Attorney you should choose someone you believe to have the proper skill and judgement so that they can make decisions which will be in the best interests of everyone concerned.
