Living longer is something to be celebrated. But it can be a less settling prospect if advancing age or an accident reduces your capacity to make decisions. Worse still, if you are incapacitated.
It is a good reason to make provisions ahead of time to pass on some, or all, of the responsibility relating to your financial and other affairs. This might include how you want your future health, medical treatment and personal care to be managed.
The following ‘tools’ are governed by different state-based laws so it is important to seek the advice of a qualified legal practitioner.
Power of attorney
A power of attorney is an important legal document which gives someone else the power to make personal or financial decisions on your behalf.
A general power of attorney becomes invalid when the person who prepared it loses the mental capacity to make their own decisions. An enduring power of attorney continues to operate even after they lose capacity such as through dementia, after a stroke or following an accident.
When a power of attorney is drawn up, among other things required by various state laws, it is important that the person making it has capacity when they sign the document.
They must be capable of understanding the nature and effect of the power of attorney and the range of decisions which the attorney can make on their behalf. They must also understand that those decisions can be made without consulting them.
The attorney role
Generally an attorney will make decisions concerning your finances, including operating your bank accounts and paying bills or buying and selling assets, so it is important to choose someone you trust.
Limits or conditions can be included in the power of attorney. For example, you can give the attorney limited authority to do specific tasks, such as paying regular bills but not selling property.
An enduring power of attorney is critical for members of self-managed super funds in order to ensure that the fund remains compliant in a smooth and stress-free manner after a member, who must also be a trustee, loses capacity.
If a member loses capacity they can no longer be a trustee which, if not resolved, may result in the fund no longer meeting the requirements of being an SMSF. Having an enduring power of attorney in place ensures it remains compliant as seamlessly as possible.
Something an enduring power of attorney can’t do is make medical decisions on your behalf. This is covered in a medical power of attorney. In consultation with doctors and other relevant people your attorney may make medical decisions, including those concerning operations or treatment options.
In addition to powers of attorney you can also prepare an enduring power of guardianship and an advanced healthcare directive (or living will) to help with decision making.
An enduring power of guardianship gives a person the right to choose where you live and make decisions about your medical care and other lifestyle choices, if you lose the capacity to make your own decisions. An advance healthcare directive (or living will) provides specific instructions about medical treatment if, for example, you are terminally ill or permanently unconscious.
Where there’s a will
Equally important as telling people how you would like your financial and personal affairs handled while you’re alive, is what should happen when you die.
A will is also a legal document which can cover things like who should get which assets, whether any trusts should be set up, where money should go and even instructions about your funeral.
A will and possibly the establishment of trusts can be extremely important where there are blended families. Without clear instructions, specific family beneficiaries, such as grandchildren, may miss out or your estate may be contested.
If you care what happens in the event that you can’t make decisions for yourself while you are alive, or after you have gone, having the right legal documentation in place will ensure your wishes are carried out.