Getting life insurance, trauma cover, total and permanent disability cover, and creating a will are great first steps in your estate planning. The next, and more often overlooked step, is to create an enduring power of attorney (EPA).
In New Zealand, you can also set up an ordinary power of attorney. An enduring and an ordinary power of attorney have different parameters and purposes.
The person who grants the power of attorney is the donor, and the recipient is referred to as the attorney.
This is a temporary set up, for a specific purpose and time period, and gives someone the power to act on your behalf in your absence. For example, managing a bank account while you are out of the country.
It is either set up for a fixed term or can be cancelled. The attorney cannot have more power than the donor. As a result, if the donor loses their capacity to make decisions, it is cancelled.
Which brings us to an EPA.
You can assign someone EPA, but it only comes into effect if you become unable to make decisions for yourself, or unable to communicate those decisions. Some examples would include dementia, a stroke or a head injury.
You need to put some serious thought into setting up an EPA. It makes sense to do it when setting up your will, as it involves making equally important decisions.
There are two types of EPA; for personal care and welfare, and for property.
This comes into effect only when the donor loses mental capacity.
The person who has been given an EPA for personal care and welfare works with medical staff and care providers to make decisions about your health, accommodation, and other care decisions.
You can only appoint one attorney for this EPA, and it only comes into effect if a medical professional or the Family Court decides you have become ‘mentally incapable’.
This EPA covers your money and assets, and you can have more than one attorney for this, or even a trustee corporation.
When setting up this EPA you can specify whether the power comes into effect immediately, or only when you lose mental capacity.
You need to choose someone you can trust to make good decisions regarding your care. You can choose the same person to be both your personal care and welfare attorney and your property attorney, or you may find you prefer someone different for each. It may depend on your relationship with them and their skill set. If you choose different people, it is wise to consider if they will work well together, as it is a requirement that they communicate with each other.
For an example, consider if you had a stroke and were unable to communicate and you had selected different EPA’s for each role. Your personal care and welfare attorney would work with the medical staff making decisions about your care, but your property attorney would be working with your insurance provider on your trauma cover pay-out to cover the costs of that care.
It is important that your attorneys are people you trust, and that have a good understanding of your values and what your wishes would be in such a situation. You can also stipulate certain people that your attorneys must consult with on EPA decisions.
Setting up an EPA may sound a bit complicated, but it is a very important step. As with many personal insurance decisions, having an EPA in place is about looking forward, and looking out for the people you care about. If there isn’t an EPA in place, your family may have to go through the cost and stress of getting a court order to make decisions about you and your property.
To review your insurance policies to make sure you have the best cover in place, contact one of our advisers.
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