Some people need time to wrap their heads around the concept of a Power of Attorney. So learning that there are various types of this legal instrument complicates matters even further.
However, having a Power of Attorney in place is an important and useful legal tool to have, especially as you get older.
We’ll cut through the jargon and explain in plain English what the various types of Powers of Attorney do.
What exactly is Power of Attorney and why is it necessary?
The basic idea behind a Power of Attorney is that it gives someone legal authority to act on your behalf for important matters in your life in some or all circumstances. It’s as simple as that.
What is more difficult is if and when you require someone to legally act on your behalf and do not have a Power of Attorney in place, most likely due to mental incapacity.
It is too late to set one up at this point, and your loved ones must go through the courts – a long, arduous, and expensive journey.
They may discover that your bank accounts are frozen because you are unable to authorise transactions, bills are unable to be paid, and important medical decisions are not made in accordance with your wishes or needs.
Ordinary Power of Attorney
An Ordinary Power of Attorney empowers someone to act on your behalf while you are mentally competent.
This could be done if you are going to move overseas for a period of time and want someone to handle your affairs at home, or if you have a planned hospital stay. It could also be due to a lack of physical mobility.
You can limit your attorney’s authority so that their mandate is not overly broad. For example, your current bank account but not your long-term savings or your home.
It is important to note that an Ordinary Power of Attorney is only valid while you have mental capacity.
Lasting Power of Attorney
If you are familiar with Power of Attorney, this may be the first thing that comes to mind.
You create a Lasting Power of Attorney to protect yourself against future mental incapacity. You identify someone (or more than one person) you can trust to act in your best interests if you become unable to make your own decisions while you are of sound mind. For example, you may be involved in a serious accident or develop dementia.
There are two types of Lasting Powers of Attorney: one for financial decisions (paying bills, investing money, buying and selling real estate, and so on) and one for health and care decisions (whether you should live in care, your diet, medical decisions etc).
They are applied for separately, though many people apply for both at the same time.
While it is a significant amount of responsibility to hand over, it is generally a prudent thing for everyone to do: you never know what awaits you around the corner.
Lasting Power of Attorney takes effect only if you lose mental capacity, and it may never be used. However, as previously stated, if it is suddenly required and is not in place, your loved ones will face a legal battle.
This could exacerbate their emotional distress as a result of your mental incapacity.
Nobody has automatic Lasting Power of Attorney for you, not even your spouse. You must apply for it.
Enduring Power of Attorney
This was the predecessor to Lasting Power of Attorney. Enduring Powers of Attorney were no longer granted in 2007.
However, if you signed one before this date, it should still be valid and achieve the same result as a Lasting Power of Attorney.
While it is a lot of responsibility to hand over, it is generally a wise thing for everyone to do: you never know what is waiting for you around the corner.
Lasting Power of Attorney becomes effective only if you lose mental capacity, and it may never be used. However, as previously stated, if it is suddenly required and is not in place, your loved ones may face a legal battle.
This may exacerbate their emotional distress as a result of your mental incapacity.
Nobody, not even your spouse, has automatic Lasting Power of Attorney for you. You must apply.
Setting up a power of attorney can be challenging, so it’s critical to follow the right steps. The repercussions of doing it incorrectly can be severe.
Get in touch if you need assistance choosing what is best for you and with applying.
