Author Katrina Shanks, CEO Financial Advice NZ Article originally published in Stuff.co.nz.
I recently came across a disquieting news article about a gentleman whose ill and unresponsive wife took a sudden turn for the worse in hospital, and he was asked if he could consent to allow further procedures to keep her alive.
The problem was, despite them being married for more than 30 years, there was a question over whether he could sign consent because he did not have an enduring power of attorney enabling him to make decisions on her behalf.
In the event, commonsense prevailed and she received the treatment he wanted her to have. Frustrated by this, he asked his lawyer about EPAs, and was told they were “more important than a will”.
It’s basically a document appointing someone to make decisions on your behalf if, through poor health or other reasons, you can’t do that yourself.
Many Kiwis think an EPA isn’t needed until they are older and perhaps nearing the end of their life. But when you consider statistics around accidents and serious illness, you can see doing it earlier has benefits.
Anyone at any age can have an accident or be incapacitated with illness. It’s then when someone needs to make sure you are being properly cared for, and that the mortgage is paid and your dependants – children, parents, or anyone else – are looked after.
Some people believe everyone over the age of 18 should have an EPA because it gives piece of mind for all concerned, and there’s a very good argument for that.
There are two broad types of powers of attorney:
‘Ordinary’ powers are used only for temporary purposes – such as if you’re going overseas and need someone to send you cash from home or pay your bills. They have no legal effect if the person who gave it loses mental capacity and is no longer able to make decisions.
‘Enduring’ powers are for longer term protection – if you’ve become mentally incapable, when an ordinary power would lapse. Enduring powers can relate to property (house, bank accounts and investments), and personal care and welfare (such as where you live and how you are being cared for).
If you are the one giving the power of attorney, you are known as the ‘donor’. The person who you appoint to act on your behalf is the ‘attorney’.
Your attorney should be someone you trust to take care of things. You can name two or more to manage your property, where you need to say if they must agree on all decisions or by majority. But you can appoint only one attorney when it comes to your personal care and welfare.
It’s important to be aware that if you want someone to act for you when you can no longer manage your finances, you need to arrange an EPA while you are still capable. An ‘ordinary’ power of attorney can’t be changed into an EPA if you are no longer capable.
Legally, your attorneys are required to always act in your best interests, consult with anyone else named in the EPA, and with you if possible, and to keep records of financial transactions. They must never make decisions that benefit themselves or anyone else – other than you.
How do you organise an EPA?
First, seek legal advice. There are forms to be filled out, and you should do that before discussing your plans with your lawyer. The law says your signature must be witnessed by a lawyer, a legal executive, or an authorised employee of a trustee corporation independent of the attorney.
Then choose your attorney.
Most people choose a family member or close friend, but you can choose anyone who knows you well and who you trust, who is over 20 years old and is not bankrupt. You can also choose a trustee corporation, but only for your property.
Make your choice carefully, because whoever you choose can act without consulting you – and you are bound by decisions they make on your behalf.
We often read in the news about people appointed as EPAs taking advantage of elderly relatives, and there are several ways you can guard against this. You could appoint two attorneys with joint responsibility, or an independent professional or trustee company.
You could also restrict your attorney’s powers, or name others who the attorney must consult before making decisions. Two attorneys or an institution are always recommended if you have a lot of money in the bank.
Speaking of money, it does cost to sign an EPA. If you use a lawyer, their usual hourly fee or task-based rate will apply. Or you could use a trustee company, where charges typically start between $150 and $290.
The danger in not signing an EPA is your family may have to apply to the courts for an order to make decisions for you. The court would appoint a person it decides is appropriate, and this can take time and extra cost.
Other points worth noting
You can cancel, suspend or amend your EPA at any time, as long as you are still mentally competent.
An EPA ceases when you die. After that, authority to manage your estate passes to the executor of your will. If you have not made a will, the courts may appoint an administrator to administer your estate.
The idea of someone else being able to sign your cheques, cancel your insurances, even sell your home is something none of us would want to think about. But if your health deteriorates and you can’t manage your affairs, having someone else to help could be just what you need.
As we saw with the gentleman with the sick wife, many people think their partner will be able to step in automatically, but that isn’t the case. If your accounts and property are in your name, they will not be able to do a thing, and it may be left to the courts.
I have EPAs in place in case something happens to me. I have a combination of relatives and trusted friends as my attorneys. I did this the same time as I updated my will.
It has provided me with significant peace of mind that if something happens to me, there won’t be any additional hurdles for those left behind.
As my financial adviser would say – the important thing is to make an EPA early and find someone you trust.