Most of us are comfortable talking about what should happen to our assets when we die. It can be harder to think about what would happen if we were still alive but could no longer make decisions or manage our affairs.
That is where enduring powers of attorney or EPOAs become important.
An EPOA is a legal document that allows you to appoint someone you trust to make decisions on your behalf. Unlike your will, which takes effect after your death, an EPOA is designed to protect you during your lifetime.
“My family can just take care of things”—can’t they?
A common misconception is that a spouse, partner or adult child can automatically manage your money or make decisions about your care if you become unwell.
Unfortunately, that is not the case. Being your next of kin does not give someone authority to access your bank accounts, manage your investments, sell your property or make significant decisions about your care.
A financial adviser recently encountered this problem when a client was urgently admitted into hospital. Funds needed to be released so the client’s children could deal with the immediate arrangements and expenses. However, the client had not put EPOAs in place and was no longer able to give the necessary instructions.
Although the children were trying to help their parent, neither they nor the financial adviser had the legal authority to access or deal with the funds. Instead of being able to focus on their parent at an already stressful time, the family faced delay, uncertainty and the prospect of applying to the Family Court for appropriate orders.
An EPOA prepared in advance could have made the situation considerably easier.
The two types of EPOA
In New Zealand, there are two separate types of enduring power of attorney.
A property EPOA covers your money and property. Depending on how it is prepared, your attorney may be able to:
• operate your bank accounts and pay your bills;
• manage your investments;
• deal with your home or other property;
• communicate with your bank, financial adviser, insurer or other organisations;
• manage your financial affairs generally.
You can choose whether your property attorney may act while you still have mental capacity, perhaps because you are overseas or physically unable to deal with something, or only if you lose capacity.
A personal care and welfare EPOA covers decisions about your health, care and living arrangements. It only comes into effect if you are assessed as not having the mental capacity to make the relevant decision yourself. It may cover matters such as where you live, the care you receive and certain medical decisions.
You can have both types of EPOA, and you can appoint different people to each role.
Choosing the right person
Your attorney should be someone you trust completely. They need to be willing and able to act in your best interests, deal with potentially difficult decisions and communicate appropriately with your family and professional advisers.
Depending on your circumstances, you might appoint your spouse or partner, an adult child, another family member, a trusted friend or a professional adviser.
It is also worth considering:
• whether the person has the right skills for the particular role;
• whether they live close enough to assist when needed;
• how they are likely to manage family dynamics;
• whether more than one person should be involved in property decisions;
• whether anyone should be consulted or kept informed; and
• who should step in if your first choice cannot act.
The right arrangement will be different for every family. Appointing all of your children may appear fair, for example, but it may create practical difficulties if documents need to be signed urgently or the children live in different places. On the other hand, appointing only one child may cause tension if the decision has not been discussed with the family.
Why you should not leave it too late
You must have the necessary mental capacity when you make an EPOA. Once capacity has been lost, it is generally too late to sign one.
Without an EPOA, a family member may need to apply to the Family Court for the appointment of a property manager or welfare guardian. That process can take time, involve additional expense and place further pressure on a family during an already difficult period.
Putting EPOAs in place while you are well allows you to choose who will act, provide guidance about your wishes and build in safeguards that suit you and your family.
An important part of succession planning
EPOAs are not only for older people. An accident or unexpected illness can happen at any age. The Office for Seniors recommends that all adults consider having them.
Good succession planning should consider not only what happens after your death but who can help you during your lifetime. Your will, EPOAs, trust arrangements, property ownership and financial planning should work together.
Speaking with your lawyer gives you the opportunity to consider the people best suited to act, when their authority should begin and whether any safeguards or special instructions should be included. Your lawyer can also ensure that your EPOAs fit with your wider personal, family and financial arrangements.
It is also sensible to review your EPOAs from time to time, particularly following a separation, death, change in family relationships or significant change in financial circumstances.Having EPOAs in place does not mean giving up control. It means deciding, while you are able, who you trust to support and protect you if help is ever needed. A little planning now can provide considerable peace of mind—and save your family unnecessary stress later.
