Handing over your affairs

By JANINE OGIER

People joke about "signing their life away" when they take out a mortgage.

A more literal use of that phrase is when people give someone power of attorney.

Circumstances sometimes mean you are unable to look after your own financial affairs.

You might be temporarily out of the country, or on your big OE, or incapacitated or ill.

In these situations, you can give someone you trust the power to act on your behalf. It's not a step to be taken lightly, as the person or "attorney" gets to control your worldly possessions.

Some business people use power of attorney to allow a sole practice firm to be run by someone else while they are away.

Unbeknown to many, your spouse, partner or parent can't automatically step in and take care of things when insurance policies, bank accounts or possessions are in your name.

To step in legally, people have to hire a lawyer and go to court, which takes time and money.

There are two main powers of attorney - ordinary and enduring.

An ordinary power of attorney involves appointing someone to look after your affairs temporarily. You can still manage things yourself but there's someone else to help. It can be for a certain period of time or open-ended.

People set the boundaries of the power of attorney. It could be for managing a bank account or share portfolio or rolling over a term deposit. It could specifically be about letting a property or even selling a house.

For instance, someone living overseas can give a family member power of attorney to act on their behalf with regards to their finances in New Zealand.

The attorney can sign cheques, send money overseas, and make decisions about tenants, mortgages and tax issues.

An ordinary power of attorney is valid while you can instruct the attorney - if anything happens to you physically or mentally it is void.

An enduring power of attorney allows someone to act for you when you are mentally incapable of doing things yourself. It has to be arranged before you become incapable.

There are two kinds: one gives the right to manage your finances and the other to make decisions about your personal care and welfare. Lawyers recommend you arrange both.

A personal care and welfare enduring power of attorney involves appointing one private individual to make decisions about a rest home or hospital and medical and personal needs when you can't do it yourself.

There's a limit on this power - an attorney cannot sign a will, make decisions about marriage or divorce or adoption, or make decisions about medical experimentation or electro-convulsive treatment or refuse permission for life-saving medical action.

It's simple to arrange a power of attorney. For an ordinary one, you just fill in a form that is available in bookshops.

For an enduring one, it's recommended the documents are prepared by a lawyer or a trustee company. A simple one shouldn't cost much more than $100.

When deciding on an attorney, bear in mind whether the person has the skills, judgment and time to handle your affairs. It can be hard for family members to act impartially.

People who are granted power of attorney cannot benefit from it unless payment is specified in the agreement.

But bad cases exist and discrepancies may go unfound for years.

Age Concern believes a significant amount of abuse of enduring power of attorney occurs.

The welfare group produced a report on the issue this year that included appalling case studies.

In one instance, a son refused to put his mother in 24-hour care despite her dementia because he did not want her house to be sold to pay the rest home fees.


The Consumers' Institute advises: * Appoint two attorneys and make the appointment "joint but not several" so neither can act without the knowledge or approval of the other.

* Appoint a professional or trustee company to oversee record keeping and accounting.

* Restrict the powers to specific limits.