Sunday, January 4, 2015

5 Reasons to Have a Power of Attorney

A Power of Attorney is a legal instrument which allows a nominated person to make legal and financial decisions on behalf of someone else. You can imagine the problems that occur with administering the financial affairs of an ageing parent, who suffers from the onset of dementia. They are incapable of making rational decisions and are in danger of losing assets with a simple signature on a document they no longer have the ability to understand.

You can avoid the added problems which can arise as one grows older, especially in cases like dementia, by granting a power of attorney to a trusted family member. It is not just a matter of common sense, it can be vitally important for the peace of mind of the family, and can bring some rationality to an otherwise trying period of life.

But before going any further let's list the major reasons for having a Power of Attorney in the first place.

  • Loss of Mental Capacity. As outlined above, dementia in old age is a common occurrence and one that should be planned for far in advance. Having a Power of Attorney in place can circumvent the problems that arise and safeguard the assets of the affected person. When a family sits down and discusses all the ramifications it is easy to come to an agreement as to how a Power of Attorney can be set up to satisfy everyone's concerns.
  • Ramifications when there is no Power of Attorney. In the event of loss of mental acuity in old age for example, if a person is deemed to be incapable of making rational decisions then control of that person's assets will have to be determined by a court of law. In such cases, where there is no Power of Attorney instrument to rely upon, the court may appoint a government department to administer the person's affairs. This can place hardship on other family members and cause great distress and delays in day to day of management issues.
  • Financial and Legal Matters. A Power of Attorney not only covers the control of financial matters but also any other legal issues that may arise. This can involve the signing of contracts or assigning beneficiaries to a superannuation fund payout or other such matters. A Power of Attorney is a flexible instrument that makes everyday life as easy as it should be.
  • Timing Matters. An enduring Power of Attorney can only be signed, when a person is of sound mind and health. After the onset of a mental disability, a Power of Attorney can no longer be signed, so it is important that you make the decision as early as possible, to avoid these difficulties.
  • Another important benefit is that the power to sign documents can be granted by people of sound mind, when they are unavailable to do so themselves. For example, having someone empowered to sign mortgage documents, whilst you are unavailable overseas.

By granting a Power of Attorney, a person does not lose control over their assets, rather they just ease the process of decision-making in the event of later mental illness or incapacity. The benefits that accrue far outweigh any other concerns and your solicitor will explain everything to you, so that there is no misunderstanding. That way you can live with the peace of mind that comes from knowing your affairs will always be under control.

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