What is a Power of Attorney?
A power of attorney is a document which allow you to appoint someone else, an attorney, to receive the power and right to make the financial decisions on your behalf. There are two main types of power of attorneys:
1. The general power of attorney; and
2. The enduring power of attorney.
The general power of attorney ceases to have effect if you lose your mental capacity to make your own decisions. The power of attorneys do not entitle the attorney to act as trustee, to give gifts or to confer benefits on attorneys or third parties.
Enduring Power of Attorney
Unlike the general power of attorney, an enduring power of attorney continues even after losing your mental capacity.
An enduring power of attorney must fulfil the following:
• It must include your expressed intention for the enduring power of attorney to continue to be effective even if you lose mental capacity after the execution of the document;
• Be signed while witnessed by a witness; and
• It must include an attached certificate which states your understanding of the effect of the document.
The Powers of an Attorney
An attorney may execute any documents and do other things on your behalf in the attorney’s own name, but the attorney cannot appoint someone else to act as a substitute attorney unless it is expressly allowed in the power of attorney.
Difference between a Power of Attorney and a Will
A will comes into effect when the principal dies and it usually describes how the assets of the deceased are to be distributed or donated and if there are young children involved, and who is going to look after them. The will may also prescribe which trusts to be established and instructions about the funeral.
The difference between a POA and a will is that the POA usually has effect until the principal dies, however the will takes effect after the death of the principal.
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