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Of all of life’s plans, one the most significant we can make is easy to ignore, and often misunderstood. 

Leaving a will can assist with what happens to your assets when the inevitable occurs. But it doesn’t cover what needs to happen when a person is alive and unable to make financial decisions.

Michelle Dixon is an Estate Planning lawyer at Aware Super and has twenty years’ experience helping people set up their estate plans. Michelle believes an estate plan is a great way to take the burden off loved ones, and to avoid family stress and even conflict at a very difficult time. It does this by giving you control over who can make decisions for you and what decisions they can make.

“I've seen it happen all too often when people die or become unable to make decisions for themselves, and they don't have power of attorney or enduring guardianship arranged. It’s a time which is already emotional, and it amps up additional stress, cost, delay and uncertainty for loves ones left behind.”

What is an estate plan?

An estate plan is more than a will. It can also include two other key legal documents that name who make decisions for you, when you cannot.

Power of Attorney names who can make decisions about your financial affairs. It includes every day money issues like accessing your bank accounts and paying bills and expenses, to the bigger decisions like buying and selling real estate, assets and investments.

You can also choose when the Power of Attorney comes into effect, such as when you are unable to make decisions for yourself. Power of Attorney can be held by a person, a group of people, or an entity like a trustee or a lawyer.

The other document is known by a few names - an enduring guardianship, guardianship orders, an advanced health directive or medical care directive. This document names who can make medical, health and lifestyle decisions on your behalf if you’re still alive but incapacitated because of illness or injury. It can also record your specific directions, like what happens if you need ongoing health care or palliative care.

In this article we focus on the importance of a power of attorney and address common concerns people have.

Power of attorney and guardianship definitions and rules are different in each state. Each has their own prescribed forms to be legally recognised, so it’s a good idea to check. For instance, in QLD and ACT, a Power of Attorney also extends to making decisions about medical, personal or lifestyle affairs. In Victoria personal and lifestyle affairs may be covered by Power of Attorney but medical decisions are not.

One rule that does apply everywhere - only you can appoint a power of attorney or perpetual guardian for yourself. No one else can do that for you, or change it for you, just as you cannot do so for someone else. A medical professional is the only personal that can determine if you are unable to make decisions – an attorney or your family are not able to determine that for you. Your appointed attorney is also unable to make changes to your will, or to the beneficiaries nominated in your super.

A common belief is that being 'next-of-kin' provides enough authority to act on a person’s behalf. But Michelle says that assumption is incorrect.

“Everything just freezes. It stops… it comes back to privacy and confidentiality.” explains Michelle.  “If there’s no power of attorney in place then there needs to be an order from a civil and administrative tribunal, which is a state or territory government entity. That's the ultimate legal authority required to be able to make enquiries and transact on your behalf.”

 2 minutes with Michelle Dixon

Control Issues: Fears of what can go wrong with power of attorney/guardianship and how to mitigate for them

 

Michelle Dixon: When making a power of attorney the common concern that people have is are they going to get ripped off? And that's a legitimate concern. And for many people, it's enough for them to not even make a power of attorney in the first place. If you don't have a power of attorney in place and the unexpected happens and you lose your capacity to make decisions for yourself, then no one has legal authority to be able to make legal and financial decisions for you, not even your next of kin. If you don't make a power of attorney and the unexpected happens, then there is a real risk that the state or territory government where you reside may actually be appointed to control your financial affairs. Most people I know don't want the government involved in any of their personal affairs. To eliminate this risk entirely, simple solution, you just get in and make a power of attorney now whilst you're able to. So law says that your attorney must always act in your best interests, which means and looks like that you can only use your money and your assets for your benefit. Never for their own benefit, never for anybody else's benefit unless you give them what's called an express power, which is just a power in the document that says that they can do that. Having a power of attorney gives you that confidence and that comfort in knowing that who you want to be in control, to be making these decisions on your behalf, someone who you know, someone who's familiar, someone who you trust to do the right thing by you when you're at your most vulnerable, it'll be who you have chosen.

You can decide who decides

Michelle suggests not to delay putting something in place.

“Most people do not want the government in charge of their affairs or in control. The easiest way to avoid all of this is to get it sorted now while you're fit and healthy and well, so that you get to take control and choose who you want to be making those decisions for you, if the unexpected happens.”

Michelle also points out that deciding on who should take on the responsibility, comes down to who you trust. The person who can make savvy financial decisions after you’re gone can be different to the person or people who will value and act on your wishes when you’re alive but unable.

An estate planning lawyer can help protect your choices

It’s possible to create a legally binding document without visiting a lawyer. Power of attorney and Guardianship DIY kits are sold in Post Offices and newsagents.

However Michelle points out that the upfront cost savings of completing the legal documents without a lawyer need to be weighed up against the costs of completing the documentation incorrectly.

“For instance, there are particular signing and witnessing requirements, in order for it to be legal. Then there’s the question of where will you store it? At the very least the person you’ve appointed should know where the original is.”

The other legitimate concern for people is what can go wrong by letting someone have control of their money. Michelle believes that’s where legal expertise provides the most value.

“It can happen, and we’ve all heard the stories of it going horribly wrong. But there are ways to reduce or mitigate the risks of bad things happening.”

An estate planning expert can help you create a power of attorney that protects you from being taken advantage financially or actions that go against your express wishes.

Once you have a power of attorney and/or enduring guardianship in place, it’s possible to change or update these documents at any time if you still have capacity.

Like all financial decisions, it can be hard to let someone have control of your money. An estate planning expert can help you create a power of attorney that protects you from someone taking advantage of you.

Checklist: Getting started with your estate planning 

  • Have a discussion with those close to you about your wishes and intentions.
  • Consider who you trust to make decisions you would want.
  • Find out if the person or people you have in mind are willing to take on the responsibility, and are good at managing money themselves.
  • Seek advice from a lawyer or your financial planner on what needs to be considered for your circumstances.

Need expert advice?

Talk to Michelle our estate planning specialist about your plan. 

^Your first appointment has a fee of $330 (incl. GST).

Hear from an estate planning lawyer at our free online event.

Find out more about estate planning with Aware Super.

Disclaimer

1This is general information only and does not take into account your specific requirements, situation or needs. You should seek professional legal advice and consider your own circumstances in relation to your estate planning needs. Estate planning services are provided by Aware Super Legal Pty Limited (ACN 606 835 170), an Incorporated Legal Practice, which is wholly owned by Aware Super. Liability limited by a scheme approved under Professional Standards Legislation.

Financial planning services are provided by Aware Financial Services Australia Limited, ABN 86 003 742 756, AFSL No. 238430.