By Stephanie Aquilina-Little, Senior Associate at Jackson Russell
A good financial plan helps you prepare for the future—building savings, managing investments, planning for retirement and making sure your family is looked after. However, even the best financial plan can become difficult to put into action if you lose the ability to manage your own affairs and no one has legal authority to act for you.
That is where enduring powers of attorney, or EPOAs, become important.
An EPOA is a legal document that allows you to appoint someone you trust to make decisions on your behalf. Unlike a will, which takes effect after your death, an EPOA protects you and your family during your lifetime.
When good financial planning is not enough
A financial adviser recently encountered this problem when a client was urgently admitted into hospital. Funds needed to be accessed so the client’s children could deal with the immediate care arrangements and expenses. However, the client had not put EPOAs in place and was no longer able to give the adviser the necessary instructions.
Although the children were simply trying to help their parent, being next of kin did not give them authority to access or manage the funds. The financial adviser could not accept instructions from them either, regardless of how well the adviser knew the family or how urgent the situation was.
Instead of being able to focus on their parent’s care, the family faced delay, uncertainty and the prospect of applying to the Family Court for orders allowing someone to manage the parent’s affairs.
An appropriately prepared EPOA could have made the situation considerably easier.
“My family can take care of things”—can’t they?
Many people assume that a spouse, partner or adult child can automatically step in if they become unwell. Unfortunately, that is not the case.
Being your closest relative does not, by itself, give someone authority to:
access your bank accounts or pay your bills;
give instructions to your financial adviser;
manage or withdraw investments;
deal with your home or other property; or
make significant decisions about your care and living arrangements.
Without an EPOA, financial institutions and advisers may be legally unable to follow your family’s instructions, even when everyone agrees about what should happen.
The two types of EPOA
In New Zealand, there are two separate types of EPOA.
A property EPOA covers your money and property. Depending on how it is prepared, your attorney may be able to manage your bank accounts and investments, pay expenses, deal with property and communicate with your financial adviser, bank, insurer and other organisations.
You can choose whether your property attorney can act while you still have mental capacity—for example, if you are overseas or physically unable to manage something yourself—or only if you lose capacity.
A personal care and welfare EPOA covers decisions about your health, care and living arrangements. It only comes into effect if you are assessed by an appropriate medical professional as not having the mental capacity to make the relevant decision yourself.
You can appoint different people to the two roles. For example, you may choose someone who is confident dealing with financial matters as your property attorney and someone else who understands your personal wishes to make decisions about your care.
Choosing the right person
Your attorney should be someone you trust completely. They need to be willing to act in your best interests, make potentially difficult decisions and communicate appropriately with your family and professional advisers.
You might appoint your spouse or partner, an adult child, another family member, a trusted friend or, in some circumstances, a professional.
It is worth considering:
whether the person has the skills needed for the role;
whether they will be available when required;
how they are likely to manage family dynamics;
whether more than one person should be involved in property decisions;
whether anyone should be consulted or kept informed; and
who should step in if your first choice cannot act.
The right arrangement will be different for every family. Your lawyer can help you work through the practical implications and include appropriate safeguards.
Do not leave it too late
You must have the necessary mental capacity when you make an EPOA. Once capacity has been lost, it is generally too late to sign one.
Without an EPOA, a family member may need to apply to the Family Court for the appointment of a property manager or welfare guardian. This can involve additional time, expense and stress at a point when the family is already dealing with illness or a significant change in circumstances.
Putting EPOAs in place while you are well allows you to choose who will act for you, explain your wishes and ensure that your family and advisers have a clear path forward if help is ever needed.
Bringing your legal and financial planning together
EPOAs are not only for older people. An accident or unexpected illness can happen at any age.
As part of your wider succession planning, it is helpful for your lawyer and financial adviser to work alongside each other. Your financial adviser can help ensure that your finances are structured to support your future plans, while your lawyer can put in place the legal authority needed for someone to manage those arrangements if you are unable to do so yourself.
Your will, EPOAs, investments, insurance, trust arrangements and property ownership should all work together. It is also sensible to review these arrangements following a separation, death, change in family relationships or significant change in your financial circumstances.
Having EPOAs does not mean giving up control. It means deciding, while you are able, who you trust to support and protect you if help is ever needed. A little planning now can provide considerable peace of mind—and save your family unnecessary stress later.
About the author
Stephanie Aquilina-Little is a Senior Associate in Jackson Russell’s Property and Private Client team.
Jackson Russell is a New Zealand law firm providing legal advice to individuals, families and businesses across a range of areas. Its Private Client team advises on matters including wills, enduring powers of attorney, trusts, estates and succession planning.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
