Most of us take for granted our ability to make daily decisions in a range of important areas: finances, property, health care, nutrition, shelter, clothing, hygiene and safety. The reality is, however, that as you grow older and experience mental decline or perhaps as a result of injury or illness, you may lose that capacity.
This is a serious issue that requires careful consideration, because unless you have put in place a trusted power of attorney to represent you, the decisions made for you by others may be at odds with your wishes.
What’s a power of attorney?
A power of attorney is a legal document that designates another person to act on behalf of any person over the age of 18 years when they are unable to do so. The law presumes adults have the capacity to make their own decisions until proven otherwise. That is, you have lost the capacity to make decisions if you cannot freely and voluntarily make the decision, understand the nature and effect of the decision, or communicate the decision in some way.
It is important to note that powers of attorney can only be established for an individual of sound mind. Further, it can only be established by the individual. A family member cannot implement a power of attorney on behalf of an individual, if that individual is no longer able to manage their financial affairs or health.
It may be established at any stage and may revoked at any time. But one thing is for certain, when it comes to establishing your powers of attorney, it is better to take action sooner rather than later.
Benefits of taking action now
There are two clear benefits of early implementation. Firstly, it will allow you to give considered thought to who you wish to nominate for this role. Naturally, that person must be someone whom you trust without hesitation, but they must also be capable to making the tough decisions that sometimes come with the responsibility. You should never be coerced or pressured into providing someone with your power of attorney. Secondly, accident and illness don’t discriminate. It is just as likely to affect a younger person early in their life as it is an older one later.
How we can help
At Stratus Financial Group our practice is to take into consideration aligned matters that may have the potential to affect your financial position. While outside of the realm of financial planning per se, these matters are closely associated with your financial circumstances. They include tax strategies, asset protection structures and legal matters such powers of attorney and estate planning.
As your financial adviser, we have a clear understanding of your overarching financial position. We are well-qualified to represent you and explain your position so that the other professional service providers are well-informed and may consider the most appropriate course of action in your ‘big picture’ scenario.
Your appointment of a person as your power of attorney is based on trust. You are giving them a lot of power over your life and financial affairs. You should not let anyone pressure you into appointing them and should talk in private and independently to an advising solicitor before giving an enduring power of attorney (EPOA). An EPOA may be revoked at any time provided you have not lost capacity.
Case Study 1 – Jasmine
Jasmine has been diagnosed with early signs of dementia. She wanted to make sure that if her condition deteriorated, someone she trusts would be able to make decisions for her when she is no longer able to do so.
She loves her two children and must decide who will make decisions for her when she can’t. Lately her eldest daughter, Zoe, has been pressuring her to sell her home, suggesting she should move into a residential aged care facility. Zoe has also been hinting that Jasmine should pay down the debts she (Zoe) has accumulated from gambling. Jasmine doesn’t want to do this and feels that Zoe’s own money worries would likely influence any financial decisions she would make as her power of attorney.
Jasmine has overheard her son and daughter arguing about ‘what’s right’ for her. Jason clearly respects his mother’s wishes and her comfort and wellbeing are his first priority. Jasmine also feels that Jason would be fair and reasonable if it came to managing the inevitably difficult decisions affecting her health. She feels more comfortable with her son being in charge of her finances and general lifestyle affairs.
Jasmine talked it through with her financial adviser and together they briefed a solicitor. Although she had early stages of dementia, the solicitor was satisfied that she still had the capacity to understand the documents that needed to be prepared including an enduring power of attorney and the appointment of enduring guardian. Jasmine legally appointed her son Jason to act as her decision-maker when she eventually loses capacity.
While she was still of sound mind, Jasmine also updated her Will. She now feels comfortable that her best interests will be served by her son, while both her children are appropriately considered in her estate.
Case Study 2 – Jill
At age 36, Jill suffered a stroke and lost her capacity to make decisions for her own health and welfare. Jill didn’t have an enduring power of attorney, and her husband Jack was not legally entitled to make decisions on her behalf. He watched, powerless, as others made important decisions in relation to her treatment and the progress of her recovery.
This caused enormous stress for Jack and their two children who felt shut out of their mother’s care plan. After a number of difficult months, Jack learned that he could apply for appointment as her administrator. It was time consuming and costly, but eventually he won the appointment and became Jill’s decision maker. A year later, Jill had recovered sufficiently to regain her capacity.
Because neither Jack nor Jill provided each other with an enduring power of attorney (EPOA), the result was enormous stress, general disruption and cost for the family.
If you are without power of attorney, I implore you to add this to the top of your ‘to do’ list. Should you need assistance coordinating your powers of attorney or estate planning, please call me on (07) 3007 2007 or email snicholas@stratusfinancialgroup.com.au
At Stratus Financial Group, we help families, professionals, executives, business owners and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.