The vital role of power of attorney

In estate planning, a Will is central, but don’t underestimate the power of a Power of Attorney. It’s crucial for unforeseen events like disability or illness.

Beyond the Will, the Power of Attorney is often overlooked but equally crucial, especially during unforeseen events like disability or illness. Without it, unresolved financial and healthcare matters can cause stress. Establishing a Power of Attorney empowers trusted individuals to act on your behalf when needed.

In the journey of securing our financial legacies, a Will often takes centre stage. However, the significance of a Power of Attorney document can’t be overstated. It’s not just about planning for the inevitable, but also for unforeseen circumstances like disability or illness. Let’s delve into why having a Power of Attorney is crucial for safeguarding your interests and ensuring smooth transitions in times of need.

Understanding the necessity

While most of us understand the necessity of having a Will to manage our finances and assets after death, many overlook the importance of establishing a Power of Attorney. Should you become disabled or suffer a long-term illness or injury, rendering you unable to manage your financial affairs, it’s crucial to have someone authorised to handle matters such as bill payments, including bonds, credit cards, electricity, and, notably, healthcare expenses. Without this, bills may accumulate for months while the legal system appoints a guardian (Curator) to manage your affairs.

Appointing a Power of Attorney

It may be assumed that a spouse or close relative would automatically assume this responsibility, but without a Power of Attorney document, they lack the legal authority to do so. It’s advisable for both you and your spouse to have separate Power of Attorney documents drawn up and periodically updated. Circumstances may change, making the previously appointed individual unsuitable or untrustworthy.

The Power of Attorney can be granted to one or more individuals, whether friends, family, bankers, accountants, or financial advisors. It’s important that they possess adequate knowledge of legalities and the time to fulfil their duties effectively.

When appointing a Power of Attorney, there are several key points to consider:

  1. Limited Power of Attorney: Grants an individual authority over specific investments, such as a current cheque account, usually achieved by signing a simple form with your bankers.
  2. Complete or General Power of Attorney: Empowers the individual to make decisions regarding all your assets and liabilities.

Immediate effect

It’s essential to understand that a Power of Attorney takes immediate effect upon signing. Even if you’re in good health and mentally alert, the appointed individual gains access to your finances. Therefore, it’s crucial to trust them implicitly or appoint a joint Power of Attorney. Instances abound of trusted individuals abusing this authority, withdrawing large sums while the account holder is incapacitated. The document remains valid until formally revoked, a factor to remember if appointing someone to manage your affairs while you’re away, such as on a world cruise.

Safeguarding your interests

In closing, while the Will serves as a cornerstone in managing posthumous finances, the often-overlooked Power of Attorney holds equal importance, particularly in unforeseen circumstances like disability or illness. Without a designated authority, vital financial and healthcare matters may linger unresolved, causing undue stress and complications. Therefore, it’s imperative to proactively establish a Power of Attorney, ensuring trusted individuals are empowered to act on your behalf when needed. Remember, it’s not just about signing a document; it’s about safeguarding your interests and securing a smoother transition in times of need.