30/10/2013

New legislation replaces the current form for a Power of Attorney with separate forms for general and enduring powers of attorney bringing NSW into line with other States.

The Powers of Attorney Amendment Act 2013 came into force on 13 September 2013 in NSW introducing major changes to the Power of Attorney (POA) forms and delivering clarity on three key matters:
•    the appointment of substitute attorneys;  
•    the continuation of powers where the office of one or more joint attorneys becomes vacant; and
•    guidance for attorneys on their roles and duties.  

New prescribed forms

To avoid confusion on which form is required, two forms will replace the current one form:

•    A General POA form is used where you, the "principal", appoint someone to make financial decisions for a set period of time or if you want your attorney to act only in relation to a specific transaction, for example, if you’re overseas or want to sell property and are unable to manage your affairs at the time. This appointment automatically terminates if you lose the mental capacity to make decisions for yourself, in which case you cannot make another appointment because you lack the capacity to do so.

•    An Enduring POA form is used where you want the attorney to have the power to make financial decisions even if you lose mental capacity to make your own decisions; namely, when you cannot understand the nature and effect of your actions. In this form you can also choose whether the power is to commence immediately, or when a medical practitioner or your attorney considers you are unable to manage your affairs.

Appointment of substitute attorneys

The new legislation makes specific provision for the appointment by principals of one or more substitute attorneys during certain vacancies in the office of the specified attorney. The authority to act as a substitute only occurs if there is a vacancy; namely when the original attorney dies, resigns, becomes bankrupt, loses mental or physical capacity, or the authority to act is revoked.

Previously, there was some doubt as to whether the appointment of a substitute attorney was effective. The new legislation will not affect the validity of an appointment of a substitute attorney before these amendments.

Flexibility to continue powers of joint attorneys

The new forms create more flexibility around the appointment of joint attorneys by removing the previous default position of the power terminating if one joint attorney died or vacated their office. The new legislation enables the principal to choose whether the power is to continue despite the death or vacation of office by a joint attorney.

Guidance on the roles and duties of attorneys

While the responsibilities of attorneys have not changed, the new forms contain more information as to what is expected of an attorney. The forms make it clear that the attorney must act honestly and in the best interests of principals, they must keep their assets separate and gain no unauthorised benefits from being the attorney.

The forms also contain a warning that civil and/or criminal penalties may be incurred for failure to meet attorney responsibilities, and in the Enduring Power of Attorney, the attorney must sign an acceptance acknowledging these responsibilities.

Other matters in relation to the legislation

The new Act gives the NSW Guardianship Tribunal the power to determine disputes related to the revocation of an enduring power of attorney rather than refer these to the NSW Supreme Court. This change is intended to reduce the cost of proceedings and ensure a timely resolution of the dispute.

The new forms do not automatically revoke a previously made POA. If you want to revoke a previous appointment, you must serve a notice of revocation on the previous attorney.

While the new forms can be used immediately, they must be used from 1 March 2014. The current form is still effective provided it is executed before this changeover date.

For more information on this article, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.