What is an Enduring Power of Attorney and why one may need one?

Firstly, you might ask “What is an Enduring Power of Attorney?” Pursuant to an Act of Parliament called ‘The Protection of Personal and Property Rights Act 1988’, every person is able to put in place types of power of attorney known as Enduring Powers of Attorney. These powers of attorney come in two forms, one for personal care and welfare and a second, for property matters. In relation to our personal care and welfare, we can only appoint one attorney at any given time, but in relation to our property matters, we can appoint two or more if so desired.

The Protection of Personal and Property Rights Amendment Act 2007 came into force on 26 September 2008. One of the main changes is a new section dealing specifically with enduring powers of attorney. It covers things like the form of the power of attorney and who signs it. Significantly, it also says the person making the power of attorney must have everything clearly explained to them by an expert in this area. The signature of the ‘donor’ or person granting the enduring power of attorney must be witnessed by either a solicitor or a registered legal executive and importantly, the witness must be independent of the attorney. So, if your lawyer has ever acted for your attorney as well as you, there will be a need for you to go and be independently advised under the new rules.

The new regulations require you to address such matters as whether you wish to place any restrictions on the powers of your attorney’s, whether you wish them to have to consult with any other person or persons in the exercise of their duty and whether you want your attorney to provide information to any person or persons on request. The new form also requires you to specify who you would like to be consulted if there is a question of your lacking capacity and in the property attorney form you can now even empower your attorney’s to make a Will for you, with consent of the court.

The distinct difference between these types of power of attorney and a ‘traditional’ or ‘general’ power of attorney is that as the word ‘Enduring’ suggests, the Enduring Power of Attorney remains in full force and power if for any reason we lose mental capacity. Any other type of power of attorney ceases to be of effect on loss of mental capacity. Your enduring power of attorney can also act as a ‘general’ power of attorney if you so wish, or it can be set up so that it only comes into force if you should lose mental capacity.

If you are thinking that you’ve heard all this before, you might care to stop and think for a moment, what happens if you lose mental capacity for any reason and you do not have Enduring Powers of Attorney in place! The Protection of Personal and Property Rights Act anticipates this situation, and provision is made in the Act for an application to be made to the Family Court for someone to be appointed as either a personal welfare guardian or a property manager.

However, whereas it might cost you up to $400 to $600 per person to put in place Enduring Powers of Attorney whilst you are of sound mind, if application has to be made to the Court, following your sudden or unexpected loss of mental capacity, the costs are likely to be dramatically higher and often in the range of $3,000. Why is this and how much could it cost you might ask?

The simple answer is that it can cost several thousands of dollars to put in place arrangements, which could have been made for a fraction of that price with a little foresight. The reason for this is that in circumstances where an application to the court is necessary, not only do you have a solicitor representing the person making application to be appointed as welfare guardian and/or property manager, but there is also an independent solicitor appointed by the court to represent the person for whom the power of attorney is required. A percentage (usually half) of that independent solicitor’s fees are usually met from a Government consolidated fund, but the remainder must be paid out of your own funds.

Before making an appointment as welfare guardian or manager, the court must be satisfied that there is a genuine loss of mental capacity and it is necessary to seek medical opinions and a report is then filed with the court by the independent solicitor. If the manager is to have the ability to deal with property in excess of $120,000 in value, this requires the consent of the court also.

Sadly, the expense does not necessarily stop once an order of the court is granted, as the orders for appointment of manager and/or welfare guardian must be reviewed in the court every three years, requiring the same process to be followed once again and further costs are incurred.

This information is provided by Brent Selwyn, Harmans Lawyers, Solicitors. February 2009. http://www.harman.co.nz