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Understanding the key differences between a general power of attorney and enduring power of attorney is crucial for making decisions on which is more appropriate for particular situations, says a law firm.
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Important details highlighted with power of attorney decisions
31 December 2021
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In an online article, Townsends Business & Corporate Lawyers solicitor Jonathan See explained that when an individual wants to give someone a limited power to do something specific on their behalf, they may not want that power to continue very long. An example of this, he said, may be someone who is heading overseas and needs a document signed while they’re away.
In these sorts of cases, they will need a limited power of attorney rather than one that is all-encompassing.
“A power of attorney is a document where a person authorises another person to act on their behalf. It provides not just the authority of what that person can do but also the limitations of that authority,” said Mr See.
Powers of attorney, he said, are generally two types: general power of attorney (GPOA) and enduring power of attorney (EPOA).
“Both types are similar in that these serve the same purpose – the principal can authorise someone to act on their behalf in respect of their financial matters. Both also do not allow the principal to authorise another to perform their duties as trustee,” he said.
One of the main differences between the two, Mr See explained, is that authority given under a GPOA ends when the principal loses mental capacity, whereas the authority under an EPOA continues to be effective or “endures” after the principal loses mental capacity.
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Another difference is that any person over 18 years of age, except for the attorney, can witness the principal signing of the GPOA, whereas only prescribed witnesses such as Australian legal practitioners can witness the principal signing the EPOA, he added.
Mr See also noted that an attorney is not required to sign the GPOA to accept the appointment, but in some states, the attorney has to sign the EPOA to accept the appointment.
“The appropriate power of attorney to use will depend on the principal’s intentions and the transactions the principal wishes to have managed,” said Mr See.
“A GPOA is appropriate if the principal wants their attorney to act on their behalf of only certain transactions such as managing bank accounts or properties. It is useful especially if the principal will be going interstate or overseas and needs someone to manage his affairs for the period of time they are away,” he explained.
The power given to the attorney is usually meant to take effect in the short or definite term, he said, and can be revoked by the principal at any time, even before the stated date of termination.
“[As] a GPOA is easier to execute, it can be executed even if the principal is overseas,” he said.
An EPOA, on the other hand, is meant to be effective beyond the time the principal loses mental capacity, so an EPOA is executed to plan for the long term and usually forms part of the estate planning of the principal, he stated.
“Legislation may also require an EPOA in certain circumstances such as in superannuation where an SMSF trustee needs to execute one so that the enduring attorney can be appointed as representative director of the SMSF trustee,” he said.
“Although the power under an EPOA can be revoked by the principal, the latter cannot revoke once they lose their mental capacity. To tell whether a power of attorney is an enduring one, look for the clause which says that the power granted is to take effect even after the principal loses mental capacity.”
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