General vs Enduring Power of Attorney – what’s the difference?
What is a Power of Attorney?
A Power of Attorney is an estate planning document that transfers authority and decision making from one person (the “principal”) to another (your nominated “attorney”).
The two most common types are a General Power of Attorney and an Enduring Power of Attorney.
What is a General Power of Attorney?
A General Power of Attorney is designed for short term circumstances, where you need your attorney to take care of your assets over a specific period of time, when you’re still mentally competent.
It can also be set to activate upon a specific event, such as the principal’s incapacity.
This document becomes obselete if the principal passes away, or loses capacity.
What is an Enduring Power of Attorney?
An Enduring Power of Attorney is designed to remain in effect even if the principal becomes incapacitated. This type of power of attorney is essential for ensuring that someone can manage the principal’s affairs when they are no longer able to do so themselves.
It begins from the date of acceptance and continues until the principal has passed away.
When the principal passes away, a Will would typically take precedence.
An Enduring Power of Attorney gives long term protection, allowing for forward planning.
What are the main differences between them?
| General Power of Attorney | Enduring Power of Attorney | |
|---|---|---|
| Uses | Your attorney can manage financial affairs, assets and decision making for a period of time, such as if you have planned absence, travel or will have a temporary loss of capacity. | Your attorney can manage financial affairs, assets and decision making when the principal loses capacity. This can include instances of chronic illness or an event where the principal is at risk of mental incapacity soon (e.g. dementia diagnosis). |
| Timing | Used for short term purposes. The principal can nominate the attorney to make decisions for them in a specific period of time, when they’re still alive and well. | Designed for long-term planning, ensuring ongoing management of the principal’s legal and financial responsibilities. |
| Authority | Temporary | Ongoing |
| Scope | Financial and legal matters only. | Financial and legal matters. Can include personal and health-related matters in some Australian states. |
| Activation | It becomes effective immediately upon signing or as specified by the principal. | It usually only comes into effect when the principal is deemed incapacitated by a medical professional. |
Who do I choose as my attorney?
You should choose someone who:
- is over 18
- can be trusted financially
- understands your wishes
- can handle the extra responsibility
- is a strong decision maker
- doesn’t have a conflict of interest
- can act in the principal’s best interest
Benefits of a Power of Attorney
Peace of mind
Having a Power of Attorney means individuals can have peace of mind knowing that their financial and legal matters will be handled appropriately and in accordance with their wishes when they lose capacity or pass away.
YOU can choose who makes important decisions for you
It is important that you choose someone that you trust as your attorney. If you do not have a Power of Attorney, there will be legal proceedings to nominate a guardianship.
You’re prepared in advance
If someone needs to step in quickly to make a decision about your financial or legal affairs, you’ll be prepared with a nominated attorney who understands your wishes.
Having clear directives can reduce family conflicts and confusion
Establishing a clear Power of Attorney with well-defined directives significantly reduces potential conflicts and confusion among family members during times of distress.
How to create a Power of Attorney
- Consult a legal professional (like us!)
- Decide which option best suits your needs: General Power of Attorney or Enduring Power of Attorney.
- Nominate an attorney
- Sign the document
- Review the document regularly (with your estate plan)
Legal requirements vary across Australian states, so please always consult your legal advisor when setting up a Power of Attorney.
Get in touch with our Aintree Group Legal team today for further assistance.
This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your lawyer.
