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Power of Attorney

Discussion in 'Investing Glossary' started by Sim, 28th Sep, 2006.

  1. Sim

    Sim Guest


    A power of attorney is a legal document which confers upon someone else (called the "attorney") power to act on behalf of and bind the appointer (called the "principal").

    The scope of authority conferred on an attorney can be very specific e.g. to "sign document X" or very general. They can also be unlimited in duration or expire after a stated period. A power of attorney may be revoked by notice to the attorney at any time.

    Powers of attorney can be general or enduring. A general power will cease to be binding if the principal becomes mentally incapable, however, an enduring power of attorney will still remain effective in these circumstances.

    The various states and territories have introduced user-friendly statutory forms for creating enduring powers of attorney. It is prudent estate planning for everyone to ensure they have granted enduring power of attorney to one or more trusted friends, relatives and advisers or to the public trustee. This becomes particularly acute for older people.

    Different attornies can be appointed for different categories of decision. For example one attorney may be appointed in relation to your financial affairs whilst another may be appointed to make healthcare decisions once you are incapable of making those decisions yourself.

    In some states health decisions may only be made by an "enduring guardian" appointed for that purpose. In addition, some states provide for special instruments called advance health directives which permit the principal to lay down binding guidelines for their future care.

    More than one attorney can be appointed and the principal can mandate how their decisions must be made, e.g. majority or unanimously etc.
    Last edited by a moderator: 30th Oct, 2006