27/01/2016

Why it is important to have an EPOA, no matter how old a person is.

An Enduring Power of Attorney (EPOA) is a document where a person appoints someone (or more than one person) to make financial and personal decisions on their behalf, should that person be unable to make their own decisions.

The most typical situation where a lot of people may think an EPOA is appropriate is if someone is elderly, and that person would likely lose the capacity to make their own decisions due to deteriorating health.  

But we all know that in an instant the unexpected can happen, no matter what age you are.  It is important in these circumstances for an EPOA document to already exist.  An EPOA may need to sign documents relating to a bank account, medical documents or even transfer of real property documents.

Once an EPOA is in place, should a situation ever arise where an EPOA is needed, the Attorney can execute any necessary documents on behalf of the Principal.  However, if there is none in place and one is needed, it may be too late for someone to appoint one, particularly if a person does not have the capacity to make and execute the EPOA.  In these circumstances, the person’s family members may need to apply to the court to have a guardian appointed.  This creates stress, delays and further costs (all of which could be avoided by proper planning and execution of an EPOA in advance).

EPOAs are also handy when it comes to SMSFs.  For example, if a director of a corporate trustee has to go overseas for an extended period of time, a person holding a valid EPOA on behalf of that director may step in and manage and control the affairs of the SMSF whist that director is overseas.

An important point to note is that different states have different requirements.  For example, in Victoria, for an EPOA to enter into a “conflicting transaction” the conflicting transaction must be expressly outlined in the EPOA document.  A conflicting transaction in the SMSF context might be one where the Attorney makes a binding death benefit nomination on behalf of the Principal (who is a member of the SMSF) in favour of themselves.

So in order to be prepared for the unexpected, it is not only important to have a valid EPOA document executed but to also regularly review the document to ensure it reflects the Principal’s current wishes and circumstances.  An EPOA should also always be considered in the wider context of an estate plan (including a person’s will).

If you would like further information or assistance with EPOAs and estate planning issues, contact Townsends Business and Corporate Lawyers on (02) 8296 6222.