What Is a Financial Enduring Power Of Attorney?
As the name suggests, a financial enduring power of attorney is a type of power of attorney that authorises another person to make legal and financial decisions for you. This is a valid and legal document, which should not be oral but has to be in the written form. Once you have signed a financial enduring power of attorney in the favour of another person, that person will have the legal right to make financial and legal decisions on your behalf.
With most types of powers of attorney, such as a general power of attorney, its validity is determined by your mental state. Hence, if the person who has created the general power of attorney becomes mentally unfit, then the general power of attorney is not considered to be a valid document any longer. However, this is the most essential difference that a financial enduring power of attorney has over other types. Even if the person making the financial power of attorney becomes mentally incompetent, the financial power of attorney will still endure and continue to be treated as a valid document.
Creating a financial enduring power of attorney
When creating a financial enduring power of attorney, you need to specify various things such as:
- Who will be appointed as the attorney: The appointment of an attorney for the financial enduring power of attorney is its main feature. Depending on the law in the state or territory you reside in, you may have a choice of appointing multiple attorneys rather than just one. If you do opt to appoint two attorneys, you will have to specify whether the attorneys need to take all financial and legal decisions jointly (meaning together with each other) or jointly and severally (meaning either one of the attorneys can take a legally binding decision if the other attorney is not available). Most states also allow you to appoint an alternative attorney. The alternative attorney’s powers will come into effect when the main attorney is unavailable due to reasons such as death, permanent disability, or mental instability among others.
- When will the financial enduring power of attorney come into effect: When creating this document, you will also have to specify when you want the powers of the attorney to come into effect. There are several choices that you have in this regard. You can specify that the attorney’s powers will start as soon as the document has been created and signed, or you can specify any later date on which the power of the attorney will begin. If you do not want the power to start on a specific date, you do have the option of choosing a specific event that will trigger the power of attorney. For example, your document can mention that the financial enduring power of attorney will only begin if you lose mental capacity and remain mentally incompetent for at least two weeks. You can specify any such event for the power of your attorney to start. If you have created the document without specifying anything particular, then it will automatically be deemed to begin immediately.
- Specifying the powers of the attorney: You can choose to specify exactly what powers will be bestowed upon your chosen attorney on creation of the power of attorney. You can keep it broad to include all types of financial and legal decisions, or you can mention only some specific decisions that may be taken by your attorney. In addition to specifying the powers of your attorney, you may also choose to mention how such power should be exercised.
Once you have created the financial enduring power of attorney by filling out the relevant form, you need to get it witnessed by at least two people. If two people are not present as witnesses to the signing of the document, it will not be considered as a valid and legal document. Of the two witnesses that you choose, only one person can be a family member. The other person should not be related to you. Also, one of the witnesses should have the authority to witness statutory declarations such as a power of attorney. Under no circumstances can any of the appointed attorneys witness the financial enduring power of attorney.
The need to change or cancel your power of attorney
After a power of attorney has been created and an attorney has been appointed, your circumstances may change and you may not need the power of attorney any longer. Or, you may want to alter the terms of the power of attorney or appoint a new attorney. In such cases, you do have the option of changing your power of attorney to specify the new terms, and even cancelling it altogether.
Reasons for changing or cancelling a power of attorney
Regardless of which type of power of attorney you have created, be it a general power of attorney, a financial power of attorney or a medical enduring document; you may want to change or cancel it for several reasons. Here is a look at some of the popular reasons why donors cancel their powers of attorney:
- Want to appoint a new attorney: This is one of the main reasons for cancelling a power of attorney. Relationships are dynamic in nature and are always changing. Hence, if your relationship with your present attorney has changed and you no longer trust your attorney to act in your best interests, or you are no longer close to your attorney and uncomfortable sharing your thoughts with them, you may want to appoint a new attorney. The best way to do so is create a new power of attorney and cancel the previous one. Another reason you may want to appoint a new attorney is because you have found another person who is better suited to make important decisions on your behalf.
- Your present attorney is not capable any more: Often your health, lifestyle or financial circumstances may change and you may find that your attorney is no longer capable of handling your affairs. For example, you had a very small business when you signed your financial enduring power of attorney and the monetary decisions were very simple. However, your business may have grown over the years and might have become extremely complex, with several complicated financial decisions to be taken. You may notice that your attorney was capable of making the small decisions but is no longer qualified to make the complex financial decisions that your business demands. In such a situation, you can cancel your power of attorney and make a new one, thereby appointing a new attorney.
- Your attorney is never available: Sometimes you may end up appointing an attorney who may not be available because he travels a lot or because he has moved house and does not live in your city any longer. Whatever the reason for the unavailability of your attorney, it could be a valid reason to cancel or change your power of attorney.
- Having multiple attorneys and one dies: Many people choose to appoint more than one attorney for their financial decisions and also specify that both the attorneys have to take all decisions jointly. In such situations if one of the attorneys dies, then you may need to appoint a new attorney in their place or cancel the power of attorney document altogether.
Regardless of what the existing reasons are, you have the power to change or cancel your power of attorney. However, it is possible to do so only if you have the mental capacity to make your own decisions. If you are mentally unfit or incompetent, then you do not have the power to cancel your powers of attorney. In such circumstances, if the tribunals or courts determine that your attorney is not necessarily acting in your best interest and is not making the right decisions on your behalf, then they have the authority to cancel any powers of attorney that you may have signed.
How to cancel or change your power of attorney
If you want to change some of the details in your power of attorney or appoint new attorneys, you will have to cancel the existing documents and fill out new forms for a new power of attorney. Here’s what you need to do to cancel existing documents of power of attorney:
- Advise your attorneys that their powers have been cancelled: It is possible to cancel your power of attorney by simply telling the appointed attorney that their powers are being revoked. However, if there is any legal problem, then it can be impossible to prove that your power of attorney had been cancelled orally. Hence, to avoid any problems in the future, you should put the cancellation in writing and make sure that all your attorneys have a copy stating your wishes to cancel their powers of attorney.
- Filling out a revocation form: Some states or territories in Australia may require you to fill out a formal revocation form in order to cancel any existing powers of attorney. If this is the law in your state, then the power of attorney will only be cancelled by filling out the relevant forms.
Once you have cancelled a power of attorney, you should make sure that you destroy all the written documents in this regard. Ask for any copies of the document back from your attorneys and destroy those too.