Estate planning in NSW
Power of attorney
Your next of kin has no legal authority over your money while you are alive. They cannot operate your accounts, sign for you, deal with your property or run your business. Those powers exist only if you grant them, and you can only grant them while you still have capacity.
Why it matters
The assumption that catches families out
Most people assume a spouse or an adult child can step in if something happens. They cannot. A bank will not let them operate an account, a purchaser’s solicitor will not accept their signature on a transfer, and the tax office will not discuss your affairs with them.
This is not a document for the elderly. Capacity can be lost overnight, at any age, through an accident, a stroke or a sudden illness. The moment it is lost it is too late, because nobody can make the appointment on your behalf. The alternative is an application to a tribunal, which is slower, public, more expensive and entirely out of your hands.
This document covers money, not you
A power of attorney is limited to financial and legal matters. It gives nobody the right to decide where you live or to consent to your medical treatment. That is a separate appointment. See enduring guardianship. Most people need both, and they should be prepared together.
Scope
What your attorney can and cannot do
Can
- Operate bank accounts and pay your bills.
- Sign legally binding documents on your behalf.
- Buy and sell real estate, provided the power is registered.
- Manage investments, deal with shares and run a portfolio.
- Collect rent and deal with tenants and agents.
- Deal with government agencies, subject to their own requirements.
Cannot
- Make or change your will. Only you can do that, or the Supreme Court in limited circumstances.
- Vote, or swear an affidavit, for you.
- Make decisions about your health or where you live. That is an enduring guardian’s role.
- Exercise a function you hold as a trustee, unless separate steps are taken. This matters where you are trustee of a family trust or a director of a trustee company.
- Give gifts or confer benefits, including on themselves, unless the document expressly authorises it. That is dealt with in detail below.
The distinction that matters most
General or enduring
There are two kinds of power of attorney in New South Wales, and choosing the wrong one defeats the entire purpose of the document.
| General power of attorney | Enduring power of attorney | |
|---|---|---|
| Starts | Usually immediately, or on a date you choose | When the attorney accepts the appointment, or at a later date or event you specify |
| If you lose capacity | It ends | It continues |
| Witnessing | An adult who is not an attorney under it | A prescribed witness, who must explain the document and certify |
| Used for | A defined task or period, such as a settlement while you are overseas | Planning for incapacity |
A general power of attorney is not a plan
A general power ceases the moment you lose capacity, which is precisely the moment you needed it. It is a useful tool for a specific transaction and useless as protection against incapacity. If the purpose is estate planning, the document must be an enduring power of attorney, and it must be executed the way an enduring power has to be executed.
There is also an irrevocable power of attorney, given for valuable consideration and unable to be revoked without the attorney’s consent while their interest continues. It is a commercial instrument used in property and finance transactions, not an estate planning document.
Timing
When an enduring power starts operating
This is a drafting decision and it is worth making deliberately rather than accepting whatever a form defaults to.
- Immediately. The attorney can act as soon as they accept the appointment, while you are still perfectly capable. Convenient where you want help now or you travel, and it requires real trust, because nothing stands between the attorney and your accounts.
- On loss of capacity. The power lies dormant until a stated event occurs. The event has to be defined well enough that a bank will accept it, which usually means a certificate from a medical practitioner. Vague triggers cause exactly the delay the document was meant to avoid.
- On another stated event. A date, a departure overseas, or any event you choose to specify.
Whichever you choose, an enduring power of attorney confers no authority at all until the attorney signs the instrument accepting the appointment. A document sitting unsigned in a drawer does nothing.
Who you appoint
Choosing an attorney
This is the most powerful document most people ever sign. Your attorney will be able to deal with everything you own at a time when you cannot supervise them. Trust is the whole of the selection criteria and competence is a close second.
Appointing more than one
- Jointly. They must all agree and all sign. The safest structure against misuse, and the one that fails when one of them is overseas, unwell or unwilling.
- Severally. Each can act alone. Practical, and it means any one of them can act without the others knowing.
- Jointly and severally. They can act together or separately at their discretion. The usual choice where the appointees are trusted and get on.
You can also appoint substitutes, so the appointment does not fail if your first choice dies, loses capacity or is unable to act. Missing substitutes is the most common defect we see in documents prepared without advice, and it is why perfectly valid appointments end up useless.
Practical considerations
- Age and health. Appointing a spouse of similar age means both documents may fail at the same time.
- Location. An attorney overseas cannot easily attend a bank or sign a transfer.
- Financial competence. Managing a portfolio, a business or a rental property is a real job.
- Conflict. An attorney who is also a beneficiary under your will has an inherent tension. That is not a reason not to appoint them, and it is a reason to think about limits and about who else is watching.
The clause people miss
Gifts, and benefits to your attorney
By default your attorney cannot give away your property and cannot confer a benefit on themselves or on anyone else. Not a birthday present to a grandchild, not the annual donation you always made, not the payment of their own expenses while caring for you. Those powers exist only if the document expressly grants them.
- Gifts. Can be authorised, and are then limited to gifts of a seasonal nature or for a special occasion such as a birth or a marriage, or donations of a kind you made or would be expected to make, and only to a value that is reasonable given your financial circumstances and the size of your estate.
- Benefits to your attorney. Can be authorised to meet their reasonable living and medical expenses, again limited by what is reasonable in your circumstances.
- Benefits to a named third party. Can be authorised on the same basis for people you name. This is the clause that matters where you support a spouse, a dependent child or a parent.
Why this cuts both ways
Leave the clauses out and an attorney who keeps paying school fees, or keeps supporting your spouse from your income, is acting beyond authority even though they are doing exactly what you would have wanted. Include them without thought and you have handed someone the ability to move money toward themselves at a point when you cannot object. This is the part of the document that needs an actual conversation, not a tick box.
Obligations
What your attorney has to do
- Act in your interests. Not their own, and not the family’s.
- Keep your property separate. Never mixed with theirs, however convenient.
- Keep records. Accurate accounts of everything received and spent. An attorney who cannot account for a transaction is in a very poor position if the appointment is later reviewed.
- Avoid conflicts of interest. Transactions between the attorney and you personally are the ones that get examined.
- Not delegate the role. You chose them, not whoever they would prefer to hand it to.
- Stay within the document, including the limits on gifts and benefits.
We give appointees a copy of the document with a written explanation of what they can and cannot do. A significant share of the problems that end up before the tribunal come from an attorney who never understood the limits of the role rather than from anyone acting dishonestly.
Particular assets
Property, superannuation and businesses
Real estate
If your attorney is to deal with land in New South Wales, the power of attorney must be registered with NSW Land Registry Services. Otherwise registration is not required. Where land is even a possibility later, register at the outset, because doing it afterwards is difficult if you can no longer assist.
Self managed superannuation
A fund generally requires each member to be a trustee or a director of the corporate trustee. Where a member loses capacity, an enduring power of attorney is the mechanism that allows the attorney to take that position in their place and keep the fund compliant. A general power will not do it, and neither will an unsigned one.
Businesses and directorships
An attorney cannot simply act as a director in your place. Where you hold directorships or run a business, the succession arrangements need to be considered alongside the power of attorney rather than assumed to follow from it.
Trusts
A power of attorney does not confer authority to exercise functions you hold as a trustee. Where you are trustee or appointor of a family trust, the deed has to be looked at as part of the same exercise.
Validity
Making it stand up
- Capacity when you sign. You must understand what the document does at the time you sign it. Capacity is assessed for the particular decision at the particular moment, and it is litigated more often than people expect.
- A prescribed witness for an enduring power. A solicitor or barrister, a registrar of the Local Court, a licensed conveyancer or an employee of the NSW Trustee and Guardian or a trustee company who has completed the approved course, or an overseas qualified legal practitioner instructed independently of any attorney under the instrument.
- The certificate. The witness must explain the effect of the document to you before you sign, and must certify that they did, that you appeared to understand it, and that they are not an attorney under the power. A defective certificate can invalidate the appointment entirely, and it cannot be cured once capacity is gone.
- The attorney’s acceptance. Signed by each attorney, and by each substitute, before they can act.
- Storage and copies. The original needs to be somewhere the attorney can get it, and institutions will generally want a certified copy rather than a photocopy.
Later on
Changing, cancelling and ending
Revoking it
You can revoke at any time while you have capacity. Tearing up your copy is not enough. The revocation should be in writing, the attorney notified, copies retrieved, banks and other institutions told, and where the power was registered the revocation registered too.
When the office falls vacant
An attorney’s office becomes vacant on their death, resignation, bankruptcy or loss of capacity. Without a substitute, the document fails at that point and you are back to a tribunal application.
On your death
The power of attorney ends immediately and confers no authority over your estate. From that moment the executor named in your will takes over, which is why an attorney should not be paying funeral accounts out of your bank account afterwards.
Interstate and overseas
An enduring power made in another state or territory operates here to the extent the powers it gives could validly have been given under NSW law, subject to the limits that apply where it was made. A power of attorney made overseas is not recognised in New South Wales.
If something is wrong
Where an attorney is not acting properly
Where someone believes an attorney is not acting in the principal’s interests, the appointment can be reviewed by the Guardianship Division of NCAT, which can require the attorney to produce accounts, vary or revoke the appointment, or substitute someone else. The Supreme Court also has jurisdiction. An attorney who has misapplied money can be ordered to compensate the principal or the estate.
Misuse of a power of attorney is one of the more common forms of elder financial abuse, and it is usually discovered late, by the family, after the money has gone. Choosing carefully, appointing more than one person where that is workable, and having the document drafted with proper limits is far more effective than any remedy afterwards.
If there is no document
What happens if capacity is lost without one
Someone has to apply to the Guardianship Division of NCAT for a financial management order. The tribunal, not you, then decides who manages your money.
- The manager may not be who you would have chosen. Where a private manager is appointed, they act under the supervision and direction of the NSW Trustee and Guardian, with the reporting and restrictions that involves. Where no suitable private manager is available, the NSW Trustee and Guardian takes it on.
- The order is generally open ended, and is reviewed on the tribunal’s own initiative or on the application of someone concerned for the person’s welfare.
- It is public and it is slow. A hearing, medical evidence, and family members giving evidence about each other, while bills go unpaid.
- Businesses do not wait. Where a business, a directorship or a settlement is involved, the delay alone can be costly.
All of it is avoided by a document signed while you have capacity.
Common questions
Frequently asked questions
Can I make one if I have already been diagnosed with dementia?
Possibly. A diagnosis is not the same as a loss of capacity, and capacity is assessed for the specific decision at the specific time. Many people early in an illness can still validly appoint an attorney. It is a reason to act quickly rather than to assume it is too late, and it is a situation where the document should be prepared with medical evidence supporting capacity at the time of signing.
Does my attorney have to be a family member?
No. Anyone over 18 with capacity whom you trust. Some people appoint a professional, and some appoint two people jointly precisely so that neither can act alone.
Can my attorney change my will?
No. But an attorney dealing with your assets can change who ends up receiving what under your will, by selling an asset that was specifically gifted, for example. That is one of several reasons the two documents should be prepared together.
Will my bank just accept it?
Usually, though most institutions have their own verification process and some will want a certified copy and their own forms completed. Where the power is drafted to commence on loss of capacity, they will want to see evidence of that event in the form the document specifies, which is exactly why the trigger has to be drafted precisely.
Do I need to register it?
Only if your attorney is to deal with real estate in New South Wales, in which case registration with NSW Land Registry Services is required. If land is a possibility later, register at the outset.
Can two attorneys disagree?
Yes, and where they are appointed jointly a disagreement stops everything, because nothing can be done without all of them. That is the trade off for the protection joint appointment gives. Where deadlock is a real risk it can be worth naming a mechanism for breaking it.
What is the difference between this and an enduring guardian?
A power of attorney covers money and property. An enduring guardianship covers your person: where you live, your health care, the services you receive. Neither covers the other’s territory and most people need both.
Can I do it myself with a form off the internet?
An enduring power still needs a prescribed witness who explains the document and certifies it, so the form alone does not get you there. The parts that go wrong are the ones a form cannot help with: whether the gift and benefit clauses should be included, whether attorneys act jointly or severally, whether substitutes are named, how the commencement trigger is worded, and whether the certificate is correct. Each of those defects is discovered at the point when it can no longer be fixed.
Plan while you can
Have it prepared properly
We prepare, witness, register and store powers of attorney as part of a complete estate plan, alongside your will and an enduring guardianship. We will talk through who should be appointed, how they should act together, what the gift and benefit clauses should say in your circumstances, and what your attorney needs to understand about the job.
Alicia Catron 0407 171 626 or Michelle Simmons 0407 534 594. Open Monday to Friday 9am to 5pm.