A Power of Attorney is one of the most important legal documents that a person can make. They can have an effect on your health, financial and living situations. As such, it is important to be aware of the powers that they can extend.
In Queensland, there are two kinds of Power of Attorney: general and enduring.
Both of these Powers of Attorney require the attorney to act in the best interests of the principal, avoid conflicts of interest and not to make unauthorised profit due to their position as attorney. If this occurs, the Power of Attorney can be suspended or cancelled and the attorney can be forced to pay compensation. In some circumstances, criminal charges can be brought against an attorney.
General Power of Attorney (GPOA)
GPOAs are a legal document used to appoint someone to make financial decisions on your behalf for a specific period or event (for example, if you are going overseas and need to sell your house). A GPOA is used when you are capable of making your own decisions and ends when either you or your attorney can no longer do so, or when it is revoked.
A GPOA can be limited to a particular transaction or particular kind of transaction. It can also be unlimited, allowing your attorney to make any financial or legal decision on your behalf.
The person appointed under your GPOA is not able to make personal decisions for you. They also cannot make a Will for you, act as a director of a company on your behalf or act as a trustee for you. However, people can be appointed under a GPOA for a company allowing them to carry out tasks on behalf of the company in the company’s name.
Enduring Power of Attorney (EPOA)
An EPOA is a legal document used to appoint someone to make financial, personal and health decisions on your behalf and continues if you become unable to make your own decisions. These can only be revoked whilst you still have capacity or if the EPOA is challenged.
An EPOA will not allow a person to act as a director of a company for you. However, you may be able to appoint an attorney under an EPOA as an alternative director if this is allowed by the company’s constitution. The attorney may also be able to exercise the rights as a shareholder to appoint themselves as a director, again depending on the Constitution and the share structure of the company.
Similarly, an EPOA does not allow someone to act as a trustee on your behalf. However a trustee may be able to grant a specific Power of Attorney (if allowed under the trust deed).
There is a bit of contention in this area regarding binding death benefit nominations (BDBN) and to what extent an attorney can make, revoke, confirm or amend a BDBN. As this is a highly complicated area, it is recommended that you consult a legal professional before undertaking any actions involving a BDBN as an attorney under an EPOA.
Generally, an attorney must not enter into transactions that conflict with their duty to act in the best interests of the Principal. These are called conflict transactions.
However, an attorney may enter into a conflict transaction if the Principal authorises the specific transaction or conflict transactions generally.
It is generally inadvisable to permit conflict transactions without restriction. Rather, we consider it important to include express terms in an EPOA that allow attorneys to enter into specific conflict transactions on behalf of the Principal which are tailored for your circumstances. This is important should an attorney need to refresh the Principal’s BDBN or use the Principal’s assets to provide the Principal and/or the Principal’s spouse with comfortable and appropriate accommodation and/or pay carer’s fees.
It is important to include express terms allowing for specific conflict transactions that are required in the circumstances. Without them, an attorney may not be able to carry out the Principal’s wishes effectively.
The law regarding Powers of Attorney, especially in regards to companies and trusts, can be quite complicated. It is recommended that you seek comprehensive legal advice before making any decisions regarding a Power of Attorney.
If you are considering making a Power of Attorney or wish to update your Power of Attorney, please contact our experienced estate planning team.