Many of us have an up-to-date will but how many of us have given thought to who will manage it once we are no longer able to?
We may be in charge of our affairs right now, but in the unfortunate case that we become sick or injured in the future, it's important there's someone there to make important decisions on your behalf.
While having these discussions aren't necessarily the easiest (or the most fun), they are important.
Why? In Australia, financial abuse is the most common form of abuse experienced by elderly people, with psychological abuse frequently co-occurring with financial abuse. Each year, more than $3 billion is lost to scams and fraud in Australia, with Commonwealth Bank Australia data indicating that 76 per cent of those affected by scam activity are aged over 50.
Whether it's time you got your financial future safeguarded, or want to help someone in your family protect theirs, here's what you should know about a Power of Attorney.
By nominating someone as your Power of Attorney, you give them the legal ability to manage your affairs and act on your behalf. These matters include your finances (i.e. spending and managing your money and shares, as well as your business transactions) and, depending on the state or territory in which you live, medical and guardianship issues.
Each Australian state and territory has their own set of laws governing the Power of Attorney, so be sure to check in with your local Public Trustee or legal representative to understand your situation. In some states, you may require a separate power of guardianship to deal with medical and guardianship issues.
When dealing with financial issues, there are two types of Power of Attorney:
A General Power of Attorney:
A General Power of Attorney can be appointed ahead of time and given specific start and end dates. They are most useful for one-off transactions (e.g. the handling of business or property deals while you are overseas) or if a person can no longer physically get to a bank or institution they need to in order to carry out their day-to-day financial matters (e.g. an elderly mother or father may appoint a son or daughter to go to the bank on their behalf if they are too frail to do so).
Most important: a General Power of Attorney ceases if you lose the capacity to make legal and financial decisions yourself. If a person can no longer understand the information and choices presented to them regarding their financial matters, they are said to 'lack capacity'. It is then when an Enduring Power of Attorney is needed.
An Enduring Power of Attorney:
An Enduring Power of Attorney has the ability to make decisions on someone's behalf once they can no longer make decisions on their own (i.e. when they lack capacity). A person must appoint their Enduring Power of Attorney before losing capacity. The matters in which an Enduring Power of Attorney can act and make decisions on are limited to finances and property. Lifestyle, medical and accommodation decisions can only be made by an Enduring Guardian (see below).
You can only appoint an Enduring Power of Attorney for yourself and never one on someone's behalf. When appointing your Enduring Power, always consult a solicitor. Enduring Powers need to be set-up in a specific way and a solicitor will help you to understand your rights (e.g. if and how you can revoke an appointed Enduring Power of Attorney).
What is an Enduring Guardian?
An Enduring Guardian is a person (or people) who you appoint to make lifestyle and health decisions when you are not capable of doing this for yourself. Decisions could relate to where you live and what medical treatment you receive.
While anyone can suffer from financial abuse, there are certain demographics that are at higher risk such as those who are isolated, those with mental or physical disabilities, those with poor financial literacy skills, people from LGBTI communities, and the elderly.
Commonwealth Bank has established a guide that specifically targets the financial abuse of elders and outlines preventative measures to safeguard the vulnerable community. Within the 'Safe & Savvy' guide, Commonwealth Bank lists 10 common forms of elder financial abuse. In first position as the most common sits 'Abusing Power of Attorney'. Other forms of abuse include frauds and scams, abusing family agreements, guarantors gone wrong and inheritance impatience.
One of the most alarming elements of elder financial abuse is that it is often not technically illegal, rather an unethical exploitation of trust. This means that while acts of elder financial abuse have the power to tear apart families and inflict profound emotional harm and psychological distress on the victim, the abuser is rarely brought to justice.
You can read more about the importance of protecting you and your family via the adequate set-up of a trusted Power of Attorney, here.
Appointing a Power of Attorney can help both you and your family to prepare for sudden changes in circumstance, and make difficult choices much easier.
While many appoint a Power of Attorney when they are beginning to experience (or planning to experience) a decline in mental health, become injured or are travelling, it pays to show initiative and be prepared in the case of an accident.
It's important that you establish a support group that not only has your best interests at heart, but also has the ability to deal with your finances and safeguard your financial future. They need to be people or a person who can provide you with the best advice and be there for you when your physical or mental health weakens. These people could include family members, doctors, lawyers, financial advisers, bank staff or accountants.
Look for a person who shows integrity, has good financial sense, someone who has the time to manage your finances, and who has the confidence to stand up for your rights. The Commonwealth Bank flags that many people that seem the obvious choice (e.g. family members) may not always be the right person for the job.
It's important to know your rights and make sure you understand the rights and limitations of the different types of Powers. Lawyers and community legal centres can always help you to understand and create Power of Attorney documents.
Click here to see where you can go to find community legal centres located across the country and State Trustees or Guardians.