Part Five: Enduring Powers of Attorney
Before I started estate planning, I had heard of an Enduring Powers of Attorney (EPA) in passing, but I had no idea what it did and thought of it as a “nice-to-have”.
It turns out they are just as important as your will.
Your will only takes effect after you pass away, whereas your EPA deals with decisions that are made while you are alive. The powers of your attorney end upon your death.
Let’s dive into this with guidance from Sarah.
🚨 Denotes parent-specific points in our guide.
Enduring Powers of Attorney (EPA) 101
An EPA is a legal document that appoints a person or persons (attorney) to make decisions for you if you become mentally incapable of doing so yourself.
There are two types of EPAs:
Property, including your financial affairs.
Personal care and welfare, including where you live, who looks after you, and what kind of medical treatment you should have.
They are separate documents. Although you can have one without the other, we strongly suggest you have both.
What happens if you lose the mental capacity to make decisions and you don’t have an EPA?
Your family would need to apply to the Family Court to have someone appointed as a property and welfare guardian. This can be expensive and time-consuming - and the Court may not appoint the person you would have chosen. Appointments made by the Family Court must also be reviewed every few years.
This is why EPAs are relevant for every adult, regardless of your current age and health.
Note: kids don’t need an EPA because, until the age of 18, parents assume these responsibilities.
Property EPA 101
A Property EPA gives your appointed property attorney the right to manage all of your personal finances and assets. They will be responsible for things such as:
Paying medical expenses
Paying household bills
Managing your personal bank accounts
They do not manage assets that are held in a trust.
Appointing your property attorney(s)
You can appoint one or more persons to be your property attorney(s). They can be individuals or a trustee corporation such as the Public Trust.
You can also appoint one or more backup attorneys (which are called “successor” attorneys) who will step in if your first-named attorney is unable to act, e.g. because they die, become mentally incapacitated or are removed from the role.
Choosing how they act
If you have more than one property or successor attorney, you’ll need to decide how you want them to act. You have three options:
Jointly: your property attorneys have to make decisions together, each with the knowledge and approval of the other(s). This means that if one attorney cannot act for any reason, the other attorney(s) cannot act alone.
Severally: your property attorneys can make decisions separately, without the knowledge and approval of the other(s).
Jointly and severally: your property attorneys can make decisions together and separately, as required. This tends to be the most common type of appointment when a person appoints more than one property attorney.
Personal Care and Welfare EPA 101
Your personal care and welfare attorney will make decisions about your health and welfare, medical treatment and living situation (for example, what care home you will live in).
Your personal care and welfare attorney cannot:
🚨 Make decisions about the adoption of your children
Make decisions about you getting married, separated or divorced
Consent to surgery or treatment of your brain, including electro-convulsive treatment for the purposes of changing your behaviour
Refuse you standard medical treatment that could save your life or prevent serious damage to you
Allow you to take part in any medical experiment unless it might save your life or prevent serious damage to your health
Appointing your personal care and welfare attorney
Unlike with your property EPA, you can only appoint one person to be your personal care and welfare attorney, and it must be an individual, not a trustee corporation.
You can also appoint one or more backup (successor) attorneys.
Five Important EPA Decisions to Make
Decision One: Who will be your attorneys and successor (backup attorneys)?
The role of an attorney can be complicated - after all, they have the authority to make life-altering decisions. And to be clear, although they are called an attorney, they do not have to be a lawyer.
Your attorney has a legal responsibility to:
Act in your best interests
Consult with you where practicable
Encourage your independence
The roles of your property attorney and your personal care and welfare attorney are quite distinct and require different levels of knowledge, experience and expertise. For this reason, it is important that the right person is chosen for the job - and that might mean the attorneys appointed under each one will be different.
Checklist for appointing your property attorney(s):
✓ Responsible
✓ Reliable
✓ Trustworthy
✓ Experienced and capable of managing your property and finances on your behalf
Checklist for appointing your personal care and welfare attorney(s):
✓ Responsible
✓ Reliable
✓ Trustworthy
✓ You trust to advocate for you
✓ Knows your health and care history and needs
✓ Knows your medications
✓ Knows your wishes with respect to care and welfare (in our next article, we’ll dive into how you can legally document this)
Ideally, your attorney(s) will also be living near you, or at least in the same country, as it makes their role easier. However, this is not a legal requirement, and it is more important that the right person is chosen for the job.
🚨 Often, parents will appoint adult children as attorneys (or backup attorneys). In addition to suitability, keep any sibling rivalries in mind. The last thing most of us want is for our kids to be squabbling during difficult moments. Even though they are two distinct roles, your personal care and welfare attorney and property attorney will need to work together often, so you should be confident that they can maintain a working relationship.
Lastly, it’s worth clarifying that you can change or cancel your EPA anytime as long as you are still mentally competent.
Decision Two: Will your attorneys be subject to any conditions or restrictions?
If you wish, you can name other people your attorneys must consult with and/or provide information to regularly. For example:
🚨 You may wish for your attorney to consult with your children about significant financial and/or care and welfare matters.
🚨 You may wish for your attorney to prepare financial accounts and provide copies to your children.
It does not mean that any person being consulted has to agree with what your attorney decides (although, ideally, this will happen). Ultimate decision-making power still sits with your attorneys.
You can also specifically state what matters you wish your attorney to act on and any limitations on how they can act. For example, you may consider appointing one attorney for your family home and another for your KiwiSaver and other investments.
In Sarah’s experience, it is uncommon for people to place many (if any) restrictions or limitations on their attorney’s ability to act.
Decision Three: Do you want your property attorney(s) to be able to benefit themselves or others?
You may want to give your property attorney power to benefit themselves and/or others. For example, you may want to authorise your attorney to:
🚨 Benefit your partner/spouse and children so that they can maintain their lifestyle. If your child depends financially on you, then your EPA will need to allow your attorney to benefit your child financially.
Allow your attorney to charge for their services.
Decision Four: When do you want your property EPA to take effect?
You can decide if your property EPA takes effect immediately (while you are mentally capable) or only if you are deemed mentally incapable. The right option for you will depend on your present circumstances.
Here are examples of why someone may want their property EPA to take effect immediately:
You’re elderly, and you want your attorney (usually an adult child or children) to help you manage your personal finances, such as internet banking, direct debits and credit cards.
You spend a lot of time overseas and want someone to help you manage your personal finances and property while you are away.
🚨 Most parents with dependent children choose for their property EPA to only take effect if they no longer have the mental capacity to make these decisions.
Your personal care and welfare EPA only takes effect if or when a suitably qualified medical practitioner deems you mentally incapable of making decisions about your care and welfare.
Decision Five: Do you want your property attorney to be able to create a will for you?
You can choose to give your property attorney(s) the power to sign a will on your behalf. The Family Court must then approve any will signed by your property attorney(s). This can be helpful in situations where a person lacks the mental capacity for a long period of time and needs to update their will.
Last word
If you want to put your EPA in place, the next step is to engage with a lawyer. They can talk you through what’s suitable for your circumstances and preferences.
This is part of Crayon’s mini-series on asset and estate planning for parents:
Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 13 December 2022.
All of our content is independent. Crayon provides you with accurate and valuable information you can use to make smart money moves for your family. We work with people we respect, and all collaborations are unpaid.
Sarah Kelly
Senior Associate, Private Wealth team at Dentons Kensington Swan
Stephanie Pow
Founder and CEO, Crayon
