Explaining Powers of Attorney

April 2018 . . . Powers of attorney are legal documents that set out who can take care of your affairs if you cannot. There are two main types of powers of attorney, general powers of attorney and enduring powers of attorney. Below we list some common scenarios which help to illustrate when each type of power of attorney would be necessary. 

General Power of Attorney

Jack and Jill are in their late twenties and are contemplating taking an overseas holiday in January to celebrate Jack turning 30. Jack and Jill own a number of student flats which will require new tenancy agreements being entered into whilst Jack and Jill are away. Jack and Jill have come in to discuss if someone can sign on their behalf.

Under a general power of attorney, Jack and Jill can appoint someone to help look after their affairs. The attorney appointed under this document would have a general scope of power that would enable the attorney to look after money or property owned personally by Jack and Jill.

Jack and Jill could choose if they would like their attorney to have the ability to act on their behalf all of the time or only whilst they were overseas. Additionally Jack and Jill can choose if they would like their attorney to have a broad scope of power or if this power is to be restricted. For example should Jack and Jill wish for their attorney to only act in relation to the tenancy agreements then this kind of restriction can be included in the document.

Jack and Jill decide to appoint Jack’s brother James to be their respective attorneys whilst they are overseas. While travelling, a keen group of students wish to sign a tenancy agreement for Jack and Jill’s Castle Street property. James signs the tenancy agreement on behalf of Jack and Jill in his capacity as attorney. On Jack and Jill's return to Dunedin, the powers of attorney become inactive until such time that they travel overseas again.

It is also important to note that this type of power of attorney will no longer be valid in the event of Jack and/or Jill losing mental capacity. Should Jack and Jill wish for someone to act on their behalf in the event of mental incapacity they will need to enter into enduring powers of attorney which are discussed below.

Power of Attorney and Deed of Delegation

On returning to New Zealand Jack and Jill expanded their investment property portfolio and established the Hill Trust. Jack and Jill are two of the trustees of the Hill Trust and Jack often travels outside of Dunedin to scope other investment opportunities. Jack would like his brother James to be able to sign the tenancy agreements whilst he is away.

Now that the investment properties are owned by the Hill Trust a power of attorney and deed of delegation would need to be signed. A deed of delegation is similar to a power of attorney; however it covers trusteeships. Importantly, general powers of attorney and enduring powers of attorney only cover property owned personally and does not cover property owned by a trust.

If you do have trust property and you wish for someone to assist with managing both your personal affairs and any trust property this can be achieved by entering into a deed of delegation and power of attorney.

In the event that Jack loses mental capacity the power of attorney and deed of delegation will no longer be valid; meaning James could no longer sign as Jack’s attorney under this document.

Enduring Power of Attorneys

Whilst completing renovations on one of their investment properties Jack loses his footing on the ladder and has a significant fall. Jack is rushed to hospital after obtaining a knock to the head. Luckily Jack and Jill had come to see us at Gallaway Cook Allan and had entered into enduring powers of attorney.

It is a common misconception that following a medical event or an accident the next of kin would automatically have the ability to manage their loved one’s affairs. Where someone has lost capacity and does not have enduring powers of attorney in place then an application to the Family Court will be required. This process can be lengthy and expensive and requires substantive information and evidence from relevant medical professionals. This can be extremely stressful during an already difficult time.

As Jack and Jill had entered into enduring powers of attorney whereby Jill had been appointed as Jack’s attorney for both property and personal care and welfare this enabled Jill to focus on her family during an emotional time.

There are two types of enduring powers of attorney, one for your personal care and welfare and one for your property.

An attorney acting in relation to your personal care and welfare would be able to make legal decisions about significant matters if a health practitioner has issued a medical certificate stating that you are mentally incapable. A significant matter is one that has, or is likely to have, a significant effect on your health, well-being or enjoyment of life such as entering residential care or undergoing a major medical procedure. There can only be one personal care and welfare attorney at any one time.

An attorney acting in relation to your property would be able to manage your property and deal with your financial affairs. You can give your attorney a general authority to act on your behalf or you can limit the power by specifying conditions and restrictions. Unlike the enduring power of attorney for personal care and welfare you can choose when the document takes effect and you can appoint more than one attorney. If you do choose to appoint more than one attorney then you must specify if they are to act jointly or separately.

Revocation and Death

Following Jack’s accident Jill and James have a disagreement. Jill no longer wants James to be her general power of attorney.

You can, by way of written notice, revoke any power of attorney at any time as long as you still have mental capacity.

Unfortunately Jack was unable to recover from his injuries and passed away.

It is important to note that all types of powers of attorney will cease to be effective when the person who granted it dies leaving the power to deal with the deceased’s personal affairs to the administrator of their estate.

Should you wish to arrange and discuss powers of attorney please contact a member of our private client team.