Snags around Enduring Powers of Attorney

Guardian Trust Warns of Snags in Current Law Around Enduring Powers of Attorney

Most adult New Zealanders with business or personal financial assets to protect should have an Enduring Power of Attorney (EPA), but Guardian Trust’s general counsel Chris Kelly warns that current legislative issues are making it difficult for people to correctly set up an EPA, or easily update an existing one, due to unnecessary red tape.

There are two types of EPA, one that governs property (assets), and one that governs personal care and welfare. Everyone over the age of 18 should complete one or both to ensure important legal protection for themselves in the event that they are incapacitated and unable to act on their own behalf.

However, Mr Kelly says, despite Enduring Powers of Attorneys being as important, from a legal point of view, as a Will, legislative changes in 2007 mean there is now some disincentive to sign or change an EPA because of more restrictive rules relating to witnessing requirements and the increased costs involved in complying with the new laws.

“We are seeing that the rule changes are causing confusion for clients wanting to set up an Enduring Power of Attorney. The intention of the reform was to provide greater protection for the person who gives the power of attorney (the donor) and to make sure full advice is given by changing how an EPA is witnessed. This is a fine intention, but it’s made getting an Enduring Power of Attorney a more onerous and expensive legal process.

“The 2007 rules state that the donor’s witness must be independent of their chosen attorney, and that their attorney’s witness must be different from their own. The first issue that has confused people is that the witness can only be a lawyer, a registered legal executive or an approved staff member of a trustee organisation like Guardian Trust – Justices of the Peace, or any other individual, are not authorised to witness the signature of a donor.

“This means that people have been forced to go to the extra time, trouble and expense of seeking independent legal representation to cover the witnessing requirements. One of the most irksome situations that occurred as a result (and now resolved by the latest amendment) was where a couple wishing to act as each other’s attorney visited a lawyer or trustee company together and then couldn’t have that adviser witness their signatures as donors, since the adviser was no longer considered independent by virtue of having acted for the couple jointly.”

The result, Mr Kelly says, is that some people are leaving old Enduring Powers of Attorneys in place, even if they are no longer appropriate for the circumstances, because it is too difficult to make a new one, while others, who clearly need an EPA, have not signed one due to the added time, cost or general uncertainty.

Mr Kelly says that a partial fix has occurred with the passing of the Protection of Personal and Property Rights Amendment Act 2010 by Parliament in July, but this will only help in some situations. Many problems still remain. “An example of the sort of difficulty that will still arise is where a mother wishes to give EPA authority to her son, but we cannot witness her signature because we did some work for her son some time ago.”

For most people, an Enduring Power of Attorney is as necessary as a Will, and without one, if an individual becomes incapacitated no one has the authority to make decisions regarding their assets or personal welfare. Their family will then be required to apply to the Court for appointment of a manager, an often lengthy, costly and stressful process.

For anyone wishing to set up an EPA, or change an existing one, Mr Kelly advises contacting an independent trustee company, or a lawyer who works in the trust field. “They will know what the imperfections in the current law are and will advise you on how to counter them in the most time and cost-effective way.”

ENDS

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