Capacity Issues in Estate Planning: Enduring Powers of Attorney

By 25 November 2019Future Planning
Capacity

End of life preparation can be a difficult topic for many people, but it is an essential process to ensure that your wishes and the wishes of your loved ones are known and protected. When making these arrangements, it’s important to factor that at some stage in the future you may lose the capacity to make sound decisions about particular areas of your life. This inability may be temporary (for example, if you are in a coma following an accident) or permanent (for example, if you have suffered a stroke, with a prognosis that you will never regain capacity). As these circumstances can’t be predicted, every person should include as part of their estate planning legal documents instructing who is permitted to make decisions on their behalf should they lose capacity to do so.

Why is this important?

There are two common misconceptions we frequently come across regarding the above, these are:

  1. if I ever lose capacity the Executor of my Will can act on my behalf; and
  2. if I ever lose capacity then my spouse will automatically be able to act on my behalf;

when in actual fact:

  1. the instructions outlined in a Will only come into effect upon your death. Naming a person/s as Executor in your Will does not give them authority to act on your behalf whilst you are still alive, even if you no longer have capacity; and
  2. your spouse can only act informally in certain situations. In particular, they will be unable to make significant financial decisions on your behalf unless a formal appointment has been made.

If you have not included incapacity as part of your Estate Plan, then state legislation dictates who will make personal/health and financial decisions on your behalf.

  • For health matters, this will be your statutory health attorney; and
  • for financial decisions (such as accessing your bank account to pay bills, or to sell your home), a spouse, family member or friend will need to apply to the Queensland Civil and Administrative Tribunal (‘QCAT’) for formal appointment as your Financial Administrator.

If an application is made with QCAT they will assess it and determine whether it is suitable for the applicant to be appointed as your Financial Administrator, or if there is a more suitable option (which may include appointing the Public Trustee to act on your behalf, for a scale fee). Similarly, QCAT may also make a determination as to who should be appointed as your guardian where relevant (which may include appointing the Adult Guardian).

What can I do to prevent this and ensure my wishes are clearly defined?

By preparing an Enduring Power of Attorney you can choose who you want to make decisions on your behalf if you were to unexpectedly lose capacity. This document provides your Attorney/s with the legal authority they require to act on your behalf, avoiding the need for them to apply to QCAT as your Guardian or Financial Administrator (which can be a 6 month process).

Your Enduring Power of Attorney ensures you can:

  1. specify who is to act on your behalf (this may be one person or multiple people);
  2. outline whether financial decisions and personal/health decisions are to be made by the same person, or separate people;
  3. nominate substitute Attorneys if your initial Attorney is unable to act;
  4. for financial matters, specify when the power is to begin (for example, are your attorneys to act immediately, or only if you lose capacity); and
  5. limit your Attorney’s power, if you wish to do so.

What if a loved one has already lost capacity and they don’t have an Enduring Power of Attorney in place?

Once you have lost capacity it is too late to prepare an Enduring Power of Attorney as you need to be considered ‘sound of mind’ to prepare and finalise one.  The test as to whether a person has capacity to execute an Enduring Power of Attorney has strict parameters, with the level of capacity required to set up an Enduring Power of Attorney actually being higher than the level of capacity required to prepare a Will.

Unfortunately, once a loved one no longer has capacity, the only option available to family members who need to make major decisions on behalf of that person is to make an application to QCAT as a Guardian and/or Financial Administrator.

Where to from here?

An Enduring Power of Attorney is a crucial component of any Estate Plan. Incapacity can strike at any stage of life and an appropriately drafted Enduring Power of Attorney will decrease the stress, inconvenience, delays and uncertainty during a very stressful time, both for yourself and your loved ones.

Contact us today on 1300 068 736 for additional information or to discuss which estate planning package would best suit you and your family.

Contact Information

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