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Power of Attorney

What is a Power of Attorney, how to establish one and who should be appointed as your trustee.
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Did you know that if you are incapable of handling your legal affairs, such as signing a loan agreement, you may entrust the authority to others to do so on your behalf? Such authorisation procedure requires a Power of Attorney.
Below are what you need to know regarding establishing a Power of Attorney.
Principal and Trustee
A principal is the person who appoints another to act on his/her behalf (i.e. you). A principal must be at least 18 years old and have the capacity to make sound judgements. A trustee is the person appointed by the principal to act on the latter’s behalf (i.e. the attorney). Similar to the principal, the trustee must be 18 or older and can make sound judgements. Where there are two or more trustees, the principal can choose to:
  • Authorise either trustee to make decisions; or
  • Authorise both trustees to make decisions collectively; or
  • Select one trustee as the primary trustee and the others as alternate trustees, who will make decisions only if the primary trustee is unable to do so.
Duties of the Trustee
A trustee should always act in accordance to the principal’s instructions and best interest. If the matter is a financial matter, the trustee must manage all affairs separately from his/her own finances thus preventing him/her from receiving undue benefits in the process.
General v.s. Enduring Power of Attorney
In a general power of attorney, the trustee will lose his/her authority to act once the principal loses the ability to make sound judgements (for example, due to loss of memory). However, this is not the case in an enduring power of attorney. As the name suggests, a trustee’s authority to act will endure even after the principal loses his/her ability to make sound judgements.
As such, it is important to consider the objective of setting up a power of attorney and appointing a trustee. If a matter is short-term in nature (e.g. signing a loan agreement), a general power of attorney would be sufficient. Where there are long-term implications to be considered – for example, where a principal needs to rely on the trustee on an ongoing basis due to incapacity as a result of old age – an enduring power of attorney would be more suitable.
Legal and Financial Affairs of the Principal
A principal can only use a power of attorney to appoint a trustee to handle the principal’s own legal and financial affairs. This includes the sale and purchase of real estate, leasing of property, funds management and operating bank accounts. The principal can choose to limit the trustee’s power by imposing restrictions on the trustee in relation to dealing with matters generally, or limit the trustee to only handling a certain matter (e.g. signing a contract for sale of property).
If the principal wishes to appoint someone to make lifestyle, health and medical decisions on his/her behalf, he/she would require an Enduring Guardianship. This will be discussed in a separate article.
Real Estate Matters
If the principal wants a trustee to deal with any real estate matter, the power of attorney must be registered with the Land and Property Information Division of the NSW Land Registry Services.
Effecting and Ending a Power of Attorney
The principal can choose to effectuate a power of attorney immediately upon signing the document, at a future date, or based on the occurrence of certain events (e.g. the principal leaving Australia). A power of attorney will cease when the principal terminates it, when the trustee no longer wants to act, or when there is a court order affecting the power of attorney. It also comes to an end when the principal loses his/her ability to make sound judgements or passes away.
For more information on power of attorney and how CMI Legal can assist you, please contact us at Contact us at 02 8386 8592.