What is Power of Attorney and do I need it?

Claire asks:
(updated on Monday, July 23rd 2007)

Hi, We are currently renting our property but go to the UK in two weeks for two years. My partners parents are going to take over and manage the property for us while we're away. Do we need to set up a power of attorney to action this? Thanks

Our Experts Answer:

It would be advisable to create a power of attorney so your partner's parents can show that they are authorised to act for you if necessary. With an ordinary power of attorney, you appoint someone to help look after your affairs. The person could be a family member, friend, lawyer, other adviser or a trustee company. It does not prevent you continuing to look after your own affairs but simply allows the person you appoint to do so as well.

You can choose how wide the powers you grant should be. For instance, it could be a general power to look after all your money or property or it could be more specific – perhaps appointing someone to manage your bank account and letting out your house while you are overseas. You can choose more than one attorney. If you do, you need to say whether they must act together (jointly) or whether they can act separately (severally). An ordinary power of attorney remains valid only while you still have legal capacity - it ceases to be valid as soon as you no longer have the mental or physical capacity to instruct the attorney.

If, for instance, you have an accident that leaves you with brain damage, the person could no longer act for you under an ordinary power of attorney. If you want someone to be able to act for you when you can no longer manage your own affairs, then, while you are still capable, you need to arrange an enduring power of attorney. An ordinary power of attorney cannot be converted into an enduring power of attorney and may be replaced only by one while you are still mentally capable.

Apart from certain statutory exceptions, an ordinary power of attorney also ceases immediately the person who granted it dies. In that event, the power to deal with property, bank accounts, etc passes to the executor named in the will or the person appointed to administer the estate.

To grant an ordinary power of attorney, you need to complete a form (available from lawyers, some stationery shops, community law centres or trustee companies). It needs to state the extent of the powers that you (as donor) are granting and you and the attorney need to sign the form and have your signatures witnessed by someone other than your prospective attorney. You can grant the power for a limited time or leave it open-ended. You can revoke, amend or extend the power at any time.

This should be in writing with the document properly signed and witnessed. Also, people who have been relying on its authority (the attorney, banks, etc) need to be informed as they are entitled to continue acting on it until they have been advised. Signing a new power of attorney does not automatically revoke a previous one unless stated.

Remember that giving someone the ability to deal with your property is to give them an important power so you should think carefully about to whom you wish to give this power and how much power to give them. They are not required to consult you and you are bound by decisions they make on your behalf so choosing someone you can trust is critical. You may wish to seek legal advice about the effect of granting an ordinary power of attorney.

Andrea Milner is editor of The NZ Property Magazine, and experienced lawyer.



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