Having a comprehensive, up-to-date estate plan in place is crucial to ensuring that you and your loved ones are looked after and provided for in the event of your incapacity or death. Failure to implement a comprehensive estate plan, or to review and update your estate plan as circumstances change, can have serious consequences for you and your loved ones.
When most people think of estate planning, they tend to think about Wills. While there is no doubt that a valid, up-to-date Will is an important element of any good estate plan, a Will on its own does not – and cannot – address all the issues that need to be covered in a comprehensive estate plan.
In our experience, one of the key issues that people most commonly overlook in estate planning is the potential for a loss of decision-making capacity (either temporarily or permanently) due to illness or injury.
There is a tendency to think of loss of decision-making capacity as something that only affects older people through conditions such as Alzheimer’s disease and other forms of dementia. However, we have seen many situations where unexpected illness or injuries sustained in accidents have deprived otherwise young, fit and healthy individuals of decision-making capacity, leaving a complicated and sometimes bitterly-contested legal mess to be sorted out. Many of these situations could have been avoided if proper attention had been paid to estate planning. The potential for a loss of decision-making capacity is an issue that should be covered in every individual’s estate plan, regardless of how young (or young at heart!) you are.
A relatively straightforward and cost-effective way to address the risk of a loss of decision-making capacity is to make an Enduring Power of Attorney (EPA). An EPA is a legal document in which you can appoint one or more people you trust to make decisions on your behalf if lose decision-making capacity – the people you appoint are your attorneys.
In your EPA, you can:
- specify the types of decisions your attorneys can make on your behalf – this can be decisions about:
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- financial matters only;
- personal matters (including health care) only; or
- both financial and personal matters (including health care);
- if you are appointing more than one attorney, specify how your attorneys are to make decisions – jointly, severally, by majority, or in another way (e.g. successively);
- specify your views, wishes and preferences about matters that are important to you – your attorneys must have regard to these when making decisions on your behalf; and
- if you wish, give legally binding directions to your attorneys about how they are to exercise their powers on your behalf.
It is essential to your ability to make an EPA that you fully understand the nature and effect of the document, and are able to make decisions about the EPA freely and voluntarily. This means that you should make your EPA as early as possible, before any impairment of your decision-making capacity arises.
The danger of putting off making an EPA is very real. If you lose decision-making capacity and do not have an EPA in place, then it will be too late for you to make an EPA. Nobody else has the legal authority to make an EPA for you, and in the absence of a valid EPA, nobody has the automatic authority to make decisions on your behalf. This can have serious consequences for you and your loved ones.
From a financial perspective, if you lose decision-making capacity and do not have a valid EPA then your financial interests may be imperilled due to there being nobody with the lawful authority to make decisions about the management of your financial affairs, such as:
- operating your bank accounts;
- paying your bills;
- managing your investments;
- insuring and protecting your assets;
- making a claim for disability, trauma and/or income protection insurance on your behalf;
- maintaining and supporting your dependants; and
- undertaking legal matters relating to your finances and property.
From the perspective of personal decisions, while decisions about your health care may be made by someone who is recognised as your statutory health attorney, the lack of a valid EPA means that there will be nobody with the lawful authority to make a range of personal decisions, including decisions about:
- day-to-day decisions about matters such as your diet and dress;
- the services you need and who provides those services to you;
- who may visit you or have contact with you;
- your living arrangements such as where you will live and who you will live with;
- whether you need to be accommodated in an environment appropriate to your needs, including aged care;
- the types of activities you are involved in, including whether you work or undertake educational and training activities;
- legal issues that do not relate to your finances or property; and
- undertaking advocacy on your behalf in relation to your care and welfare.
In the absence of a valid EPA, if you lose decision-making capacity it will be necessary for someone with an interest in your welfare to apply to the Queensland Civil and Administrative Tribunal (QCAT) for an order appointing an administrator (in relation to your financial affairs) and/or a guardian (in relation to personal matters including your health care). The process of applying to QCAT can be expensive, time-consuming, and stressful for your loved ones.
The decision as to who will be appointed to manage your affairs will be up to QCAT – there is no guarantee that the tribunal will appoint someone you would have chosen, and you will be unable to tell the tribunal whom you want to act on your behalf. If there is conflict or the tribunal is not satisfied that the person applying is an appropriate person to manage your affairs, then QCAT may appoint the Public Trustee of Queensland as your administrator (for financial matters) and/or the Public Guardian as your guardian (for personal matters including health care).
The key benefits of making an EPA as part of your estate plan are:
- you are able to control who will have the power to make decisions on your behalf if you lose decision-making capacity;
- your EPA can be activated promptly if and when you lose decision-making capacity so that your attorneys can take appropriate steps to protect your interests; and
- your loved ones will not be subjected to the expense, delay, stress and uncertainty of applying to QCAT.
Once in place, you should review your EPA regularly, and update it when necessary, especially if any of the following events occur:
- an attorney dies, loses decision-making capacity, becomes bankrupt, or becomes your paid carer or health care provider – these events will revoke the appointment of the relevant attorney;
- if you get married or enter a civil partnership – these events will revoke your EPA (wholly or partially);
- if you divorce or terminate a civil partnership – these events will revoke the appointment of an attorney who was formerly your spouse or civil partner;
- if you lose trust and confidence in someone you have appointed as your attorney – they will remain eligible to act as your attorney unless and until you revoke the EPA in which you appointed them.
If you have any questions you can contact Geoff Cameron or call our Wills and Estate Planning team on 07 3370 5100 for more information on Enduring Power of Attorney.
