When is a discretionary bonus not discretionary?

Broadly speaking, granting Power of Attorney to another person (grantee) gives the grantee the right to act on behalf of the person who grants the ‘Power’ (grantor). These rights include the power to sign documents on behalf of the grantor.

Between family members (particularly between spouses and life partners), Powers of Attorney assist in circumstances of unforseen or prolonged absences, particularly overseas or intestate trips by one person where signed documents sent by fax or email are often inadequate to satisfy legal requirements.

From an estate planning perspective, a Power of Attorney becomes essential in circumstances where a person becomes incapable of looking after their own affairs due to accident or illness.  The grantee is empowered as an authorised agent to act on behalf of the incapacitated grantor.

A Power of Attorney ceases at the time of death of the grantor and, unless it takes a particular form, may cease on the grantor becoming incapable of managing his or her own affairs (see below).

The following different types of Power of Attorney can be identified:

  • General Power of Attorney

Under this power, the grantor appoints the grantee to act on his/her behalf for all legal and financial affairs. This Power ceases if the grantor dies or becomes incapable of managing his or her own affairs.

  • Enduring Power of Attorney (Financial)

This is essentially the same as for the General Power, however, in this case the Power continues when the grantor becomes incapable of managing his or her own affairs.

  • Enduring Power of Attorney (Medical Treatment)

This is a Power granted under the Medical Treatment Act 1986 of Victoria and empowers the grantee to make certain decisions on behalf of the grantor regarding the authorising and or withholding of medical treatment for the grantor if the grantor is incapable of making those decisions.

Enduring Guardian

This Power is granted under the Guardianship and Administration Act 1986 of Victoria and empowers the grantee to make lifestyle and healthcare decisions on behalf of  the grantor.  These decisions can relate to where the grantor is to live and visitation rights, etc, if the grantor is incapable of making those decisions on their own behalf.

It will be seen that there may be an overlap between the Enduring Power of Attorney (Medical Treatment) and the Enduring Guardian’s powers regarding decisions on medical treatment.  Where that occurs, the person who holds the Enduring Power of Attorney (Medical Treatment) effectively has priority over the person who holds the Enduring Guardian power on medical treatment decisions.

We usually recommend the execution of an Enduring Power of Attorney (Financial) and an Enduring Power of Attorney (Medical Treatment) for all clients.  For spouses and life partners where there are children, we usually recommend that consideration be given to making a ‘default’ appointment of one or more children to cover the possibility of incapacity of both parents.

Some general points to note regarding Powers of Attorney are as follows:

  • The grantee can be one or more persons
  • Where the grantee comprises more than one person, those persons can be required either to act unanimously, or by action of any one of them
  • The Power can be revoked at any time up to the time when the grantor becomes incapable of making decisions
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