Personal estate planning is an incredibly important undertaking. We all appreciate the significance of creating a will and making sure there’s a formal plan for our affairs when the inevitable occurs… but do you also have a Power of Attorney?
As you plan for the future, it’s worthwhile appointing someone you trust to manage your finances, just in case something happens, and you can’t look after them yourself.
What is a Power of Attorney?
Essentially a Power of Attorney (PoA) is a legally recognised document that appoints a person, or people, to manage your assets and financial affairs when you are unable to do so… whether due to illness or absence.
You can appoint a general Power of Attorney for a specific period of time, or an Enduring Power of Attorney to support you indefinitely… until either you revoke enduring status, or you pass away.
Appointing a PoA does not mean you give up your financial control… it simply gives someone else authorisation to act on your behalf.
In Australia, each state has its own set of definitions and rules about PoAs. Visit the Australian Government website to find your state or territory’s link. The process of appointing a PoA should be done in consultation with your adviser or solicitor.
Why do you need a Power of Attorney?
There are two key reasons you would choose to appoint a PoA.
Firstly, you are planning on travelling and you want to have someone manage your finances locally while you are away.
For instance, you might want to give your attorney access to your bank account when you are overseas so that they can pay your bills.
You don’t want to be worried about your electricity being cut off while you are enjoying summer in the Côte d’Azur or adventure trekking the Inca Trail.
Secondly, appointing a PoA can help bring you peace of mind. It will provide reassurance that you are prepared should you become ill or no longer have the capacity to manage your finances yourself.
This is particularly important if you utilise the services of a professional financial adviser, as they are unable to make changes or adjust poor performing investments unless instructed by you or your authorised representative. This includes superannuation and any retirement income streams. Your adviser can provide you with recommendations but must have direct approval to act on the advice.
It is also worth noting that appointing an attorney should be completed long before it is required. If you are in your thirties or forties and are preparing your will, then you should consider making your PoA arrangements at the same time. It can certainly help should you have an accident and be unable to maintain your day to day financial affairs… or if you are living overseas and require signed and witnessed documents, your attorney can look after it for you.
Who should you appoint?
Your attorney will hold a great deal of responsibility, so you need to make sure they are someone you trust. You should be confident that they will always act with your best interests in mind and not make decisions or take actions that would conflict with your wishes.
Often people choose their family members… a spouse, adult children, siblings or other relatives, because they tend to have an understanding of how you would conduct your affairs.
You can appoint more than one attorney and you can also specify whether decisions must be made unanimously or if they can act individually on your behalf. Sharing the responsibility between two or more people can help ease concerns if your attorney is feeling unsure about their role.
Plus, if a challenging situation arises, a team of attorneys can help find a solution together, rather than relying on a single individual.
When you do select your PoA, be sure to discuss your wishes in detail with them so you can be confident they understand their position and are ready to do what’s needed, when the time comes.
Inform your adviser
Our final recommendation is to tell your financial adviser that you have appointed an attorney.
Ideally, you would provide them with a copy of the documentation… and if it is possible, arrange a personal introduction. This can help to streamline their relationship should your attorney need to interact with your adviser on your behalf.
Being prepared for uncertainty is the best way to guarantee your interests are always protected. Read more Financial Planning articles.