In Australia, when you need to authorise another person to make decisions about your assets or legal matters, you generally require a legal document — a General Power of Attorney or an Enduring Power of Attorney. This is also a sensible way to prepare for unexpected circumstances. So what exactly is the difference between a General Power of Attorney and an Enduring Power of Attorney? And what should you keep in mind when drafting one? This article will explain in detail, using New South Wales as the example.

1. What Is a Power of Attorney?

A Power of Attorney (Power of Attorney, POA) is an important tool for estate planning — in other words, a legal document that authorises another person to make decisions on your behalf in relation to specific matters when you are unable or too busy to do so yourself. A Power of Attorney may be needed in a range of situations; for example, if you are overseas and unable to return to Australia to sell or purchase Australian property in person, you can draft a Power of Attorney to authorise a family member or friend to handle the sale or purchase on your behalf.

A Power of Attorney allows the attorney to handle the principal’s asset and legal matters. In essence, where the principal is unable to deal with their assets in certain circumstances, the attorney will be given the authority to deal with those assets on the principal’s behalf.

There are two types of Power of Attorney: a General Power of Attorney (General Power of Attorney), and an Enduring Power of Attorney.

2. General Power of Attorney

A General Power of Attorney is a legal document that allows you (the principal) to appoint one or more people (attorneys) to act on your behalf. A General Power of Attorney gives the attorney authority to manage your legal and financial affairs, including buying and selling real estate, managing shares and other investment assets, operating your bank accounts, and so on.

It is particularly important to note that if the principal passes away or loses the capacity to make their own decisions, the General Power of Attorney ceases to operate. In other words, a General Power of Attorney is effective only while the principal still has the capacity to make their own decisions.

In addition, a General Power of Attorney does not authorise the attorney to make decisions about the principal’s personal health or lifestyle. Health and lifestyle decisions can only be made by a validly appointed guardian.

[Example] Under a General Power of Attorney, the attorney has the authority to make decisions on the principal’s behalf in situations such as the following:

1. Operating the principal’s bank accounts while they are on holiday;
2. Voting at meetings on the principal’s behalf;
3. Selling the principal’s house on their behalf while they are in hospital, and so on.

3. Enduring Power of Attorney

An Enduring Power of Attorney can also authorise another person to handle asset and legal matters on your behalf. Unlike a General Power of Attorney, an Enduring Power of Attorney (Enduring Power of Attorney) is a legal document that continues to operate after the principal has lost the capacity to make their own decisions. An Enduring Power of Attorney therefore allows another person to make legal and financial decisions for you at a time when you are no longer able to make those decisions yourself. For example, an elderly principal who is concerned about later developing dementia or experiencing other issues that may affect their decision-making capacity may sign an Enduring Power of Attorney. That way, if the principal one day loses the capacity to make decisions independently, the Enduring Power of Attorney allows their chosen attorney to handle their affairs, rather than having a person appointed by the court to do so.

As you can see, an attorney under an Enduring Power of Attorney is given more significant powers. For this reason, there are additional requirements for an Enduring Power of Attorney:

1. The Enduring Power of Attorney must clearly state that the principal intends for the Enduring Power of Attorney to continue in operation after they lose decision-making or legal capacity;
2. The attorney must sign the Power of Attorney to indicate their consent;
3. The Power of Attorney must be signed by a prescribed witness, who must also sign a certificate on the form confirming that he or she has explained the Enduring Power of Attorney to the principal and that the principal has understood it.

[Example] Situations in which an Enduring Power of Attorney is of benefit to the principal:

1. While the principal is in a coma, the attorney can help manage their bank accounts;
2. If the principal is suffering from dementia, the attorney can help sell property on their behalf.

Note also that, in Queensland and the Australian Capital Territory, an Enduring Power of Attorney permits the attorney to make personal lifestyle decisions on the principal’s behalf. New South Wales, by contrast, does not allow an Enduring Power of Attorney to appoint a person to make personal decisions; instead, an Enduring Guardian must be appointed separately for such personal decisions.

4. Key Differences Between the Two Types of Power of Attorney

1. Even if the principal loses the capacity to make their own decisions, the attorney under an Enduring Power of Attorney can still make legal and financial decisions on the principal’s behalf. A General Power of Attorney, however, can only be used while the authorising party still has the capacity to make their own decisions.
2. In some states, an Enduring Power of Attorney allows the attorney to make not only legal and financial decisions on the principal’s behalf, but also other personal decisions. A General Power of Attorney, by contrast, only permits the attorney to make legal and financial decisions on the principal’s behalf.
3. An Enduring Power of Attorney carries longer-lasting and more significant power, so the choice of attorney must be made with even greater care. The benefit, however, is that if something unfortunate happens — for example, if the principal develops dementia in old age, or suddenly suffers an accident and loses the capacity to think clearly — the Enduring Power of Attorney allows an attorney whom the principal trusts to handle their affairs, rather than leaving that task to a person appointed by the court.

5. Matters Commonly Dealt With Under a Power of Attorney

• Paying bills
• Operating bank accounts
• Buying and selling property
• Managing investment assets
• Collecting rent
• Signing legal documents, and so on

6. Who Can Be Appointed as an Attorney

The person appointed as your attorney can be a relative or friend, a lawyer, or a trust organisation, for example. The appointed attorney takes on significant responsibilities, so the choice of attorney requires careful consideration: choose someone trustworthy and professional, who is at least 18 years old. At the same time, make sure that they have a sufficient understanding of the matters you are entrusting to them, and that they have the time, energy and ability to attend to those matters.

7. Where Should You Keep Your Power of Attorney?

We recommend keeping your Power of Attorney document in a secure place so that it can be located and used when needed. At the same time, you may wish to provide copies of the Power of Attorney to the following parties:

• Your lawyer
• The appointed attorney

8. How Should a Power of Attorney Be Drafted?

Generally speaking, a Power of Attorney will typically include the following: the principal’s basic details, the attorney’s basic details, the reason for the appointment, the matters covered, the scope and duration of the authority, whether the attorney has the power to delegate, the principal’s signature, the date, and so on. The Power of Attorney should be drafted by the parties in accordance with the actual circumstances and requirements of the situation, and it must not contain any information that is contrary to law, false, or improper.

Final Thoughts

If you need to grant a Power of Attorney, we recommend engaging a professional lawyer to draft the document so that the responsibilities and obligations of both the principal and the attorney are clearly understood. This provides a solid foundation for how the Power of Attorney will be carried out in practice and helps to prevent unnecessary disputes.