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Why you should have a power of attorney

From Money Magazine, July 2003

A power of attorney is an important document that can help with the smooth running of your daily affairs. Effie Zahos reports.

You make a will so that your assets can be distributed according to your wishes after your death. But what happens if you’re on an overseas holiday and an investor makes an offer on your home that’s just “too good to refuse”. What can you do? The answer is simple: make sure you sign a “power of attorney”.

In brief

• A power of attorney is a legal document that gives a person (the attorney) the authority to perform certain functions on someone else’s behalf (you). It’s an important part of any good financial plan.
  
  
• There is a catch and that is, you need to appoint somebody you can trust. If you can’t be certain, then you’re probably better off without one. After all, you’re giving your attorney a lot of power – the power to make legally binding decisions on your behalf.
  
  
• The power of the attorney can be limited to what you want your attorney to do. You limit the decisions that the attorney can make by simply writing your limitations on the document, in accordance with each state/territory rules.
  
  
• If you find it difficult to choose, you can give more than one person a power of attorney and stipulate that any decision must be unanimous before it is acted upon. This provides an extra safeguard.

What the experts say

Estate-planning lawyer Peter Cain, of Iron Group, a Melbourne-based law firm, says the biggest mistake people make with power of attorneys is that they procrastinate. “Once you’re mentally incapacitated, it’s too late to sign a power of attorney,” he says. “You don’t have the legal ability to be signing any documents. It’s the same argument with wills. You can’t sign a will once you’re dead. That’s why you need to consider power of attorneys now when you’re fit and well.”

For the complete story see Money Magazine's July 2003 issue. Subscribe now.