What is an Enduring Power of Attorney (EPA)?
An EPA is a legal document which empowers a person to delegate the ability for someone to make financial or property decisions on their behalf, should they lose legal capacity. A person who makes an EPA is referred to as a donor whilst a person who is delegated such powers is referred to as a donee.
Enduring Power of Attorney vs an ordinary Power of Attorney
An EPA differs from an ordinary Power of Attorney in that an EPA remains valid and in effect despite the subsequent legal incapacity of the donor. An EPA will ultimately cease on the death of the donor or where it is otherwise revoked by the donor (whilst they still have capacity) or where it is revoked by the State Administrative Tribunal.
Potential Benefits of using an EPA?
There are significant benefits offered by the use of an EPA. Every adult with financial affairs should consider making an EPA to safe guard the future management of their financial affairs in the event of the loss of legal capacity. Making an EPA is a prudent part of planning for the unexpected exigencies of being, especially later in life given the incidence of dementia related illnesses.
Most importantly, an EPA allows you to choose a person whom you want and know can be trusted look after your financial affairs.
Having an EPA also negates the need to apply for an administration order under the Guardianship and Administration Act 1990 (WA) to facilitate the management of the financial affairs of someone who has lost legal capacity.
Is an EPA different from a Will?
EPAs and Wills are usually offered together by solicitors. Accordingly, a number of people think they should only get an EPA as part of preparing or revising their Wills. It is important to distinguish that a Will only operates from the death of the maker, whereas an EPA will operate whilst a person is legally incapacitated and is designed to cover the period between incapacity and death.
Enduring Power of Attorney and Self Managed Super Funds (SMSF)
EPAs offer particular advantages in relation to members of SMSFs. An EPA will not only provide the donor with the choice as to who should control their SMSF and enable the attorney to continue to operate and manage the fund when the member/trustee no longer has the capacity to do so, but will also ensure that the SMSF continues to be a complying SMSF for the purposes of the Superannuation Industry (Supervision) Act 1993 (Cth) (“SIS Act”).
In the absence of an EPA, upon legal incapacity, the trustee or director may be discharged from their duties, causing the SMSF to no longer comply with the regulations of the SIS Act. A non-complying SMSF does not qualify for concessional tax rates and may also attract other undesirable legal and practical consequences.
Conclusion
An Enduring Power of Attorney is a relatively inexpensive document to prepare, but offers benefits. It is important that an EPA is prepared and executed correctly to ensure that it will be enforceable should the need to use it arise.
