Question: I have been told that making a Power of Attorney is something I should consider doing. Can you please outline why I should do this and what the implications for me are?
Answer: In my opinion a Power of Attorney (POA) is as important as making a will, and something everyone should give careful consideration to, and not just as they advance in years.
A POA is basically a legal document that an individual draws up, that will enable someone you trust to make decisions on your behalf. This individual is known as the attorney.
The most common type of decisions you will be asking them to make normally centre around your financial position and can include issues such as buying or selling property, as well as opening and closing bank accounts or simply making decisions around your various investments. They will do this on your behalf at a time when you are no longer able to, or indeed lack the mental capacity to make decisions for yourself.
As none of us know if and when that event might occur, it is important to instigate that process long before it happens. A POA can be acted upon however, even when you do have the capacity to make decisions.
For example, a POA can be helpful if you need someone to carry out actions such as paying bills if you are out of the country for long periods of time, or simply incapacitated through physical illness. This is why having a POA is in some respects like making a will.
Unlike a will however, a POA has to be registered and therefore recognised as a legal document that can be acted upon. The attorney is free to make decisions within the scope you have outlined in the POA.
It is therefore important to consider that the person you appoint will have the same control you have over your finances.
As a result you need to be sure that the person you appoint will only make decisions that you will want to be carried out, and you have confidence that they will always act in your best interests.
For many the fact that you are effectively handing over the decision making process to another person poses too much of a risk and therefore they don’t wish to effect a POA.
There are some safeguards therefore that are built into a POA.
Firstly as already mentioned, a POA has to be registered for it to be legally recognised, secondly the attorneys and yourself have to have any signatures witnessed and finally, an attorney must act within the code of practice which makes it clear that they must always act in your best interests. So for example, it would be easy to prove that an attorney, who sold your home and effectively left you without a roof over your head, was not acting in your best interests.
Another way of adding protection is to appoint more than one attorney. You can also decide whether they act independently, together and independently or together in some matters and independently on others. If you decide they are to act together this will mean that on all decisions they must act in agreement.
You do not have to seek advice to set up a POA but as with all these complex matters, I would strongly recommend you do so, as they will be better placed to give you some independent advice, and ensure that any POA is adapted to meet your personal circumstances.
Raymond Mulligan is managing director of Johnston Campbell, a company of independent financial advisers regulated by the Financial Services Authority. For further information, please contact firstname.lastname@example.org or (028) 9022 1010