Should you be thinking about preparing Enduring Powers of Attorney?
If you are unable to make decisions for yourself at any stage, it is important to have something in place so someone can act on your behalf and make decisions for you.
Life is full of uncertainties, and none of us can predict when an accident, illness, or mental incapacity might strike. By setting up an enduring power of attorney (EPA), you gain the power to choose who will make decisions for you and how they should be made.
The Protection of Personal and Property Rights Act 1998 (often referred to as the “PPPR Act”) provides legal means to assist people who are or who become no longer mentally able to take care of their own affairs.
A power of attorney is a document whereby you appoint another person to make decisions or sign documents on your behalf. An EPA is the most common type of power of attorney. This allows a person you have named to act on your behalf and to continue acting even when you can no longer make decisions for yourself.
EPA’s can be used if you are out of the country and you need someone to manage your property, or if you become mentally incapacitated and can no longer properly look after yourself.
Mental incapacity can happen for a variety of reasons including a car crash, old age or a medical event. Unless you have signed an EPA before you lose capacity, no one has an automatic right to step in. A spouse or partner may be able to deal with some of your jointly owned assets, but they are not authorized to sign on your behalf in relation to your personal assets if you are mentally incapacitated.
There are two types of EPA’s, one for property and one for personal care and welfare. Property covers things such as land, bank accounts, life insurance, Kiwisaver and investments. A personal care and welfare attorney will make decisions about what medical treatment you might need, who will look after you and where you will live.
Why do you need it?
There may come a time when through an accident, serious illness or incapacity, that you are unable to make or communicate decisions yourself. It is important that in this situation your bills and mortgage can be paid and your property sold and that you are properly cared for.
What are the responsibilities of an Attorney?
Your attorney must promote and protect your welfare and best interests at all times. Unless your EPA allows, they cannot use your property for their own benefit. As far as possible, your attorney must include you in decision-making, so they are required to consult with you to exercise your decision-making capacity as far as practicable.
Who should you appoint as your attorney?
You should appoint an attorney who you trust and who has a good understanding of what decisions you would make if you were able to. This is very important as at some stage, you may be fully reliant on this person. This person may be a spouse, partner, child, close friend, or other family member who you trust with this responsibility.
You can appoint a different attorney for property and for personal care and welfare. For property you can also appoint more than one person as your attorney requiring those people to act together. You can appoint back up attorneys if your first attorney is unable to act.
If you change your mind about who should be your attorney, you can cancel or revoke your EPA at any time provided you are still mentally capable to do so.
When does it come into effect?
An EPA for personal care and welfare only comes into effect if a doctor has signed a certificate to say that you are not longer mentally capable. For a property EPA, you have a choice or whether the EPA only comes into effect when you are mentally incapable of if it comes into effect immediately when the documents are signed. This can be useful if you are overseas or if dealing with your finances and affairs becomes to overwhelming for you to manage.
What happens if you do not have an EPA?
If you do not have an EPA and you lose capacity, the alternative path is to get an order from the Family Court. The judge relies on information presented to them in court to decide who will be your attorney. The Court may not appoint the person you would have chosen to make decisions on your behalf.
The court can appoint a property manager to look after your property and a welfare guardian for your personal care and welfare. People appointed by the court have more limitations on their powers than someone appointed as an attorney under an EPA. This process takes time, and the court is required to appoint an independent lawyer to look into matters and report to the courts which may need to be paid by the applicant.
Court appointed welfare guardian and property manager orders also need to be renewed every three years. They also must report to the court every year providing full statement of account. This makes it a more costly process.
