Enduring Powers of Attorney – Important Law Changes in New Zealand

By | May 17, 2017

Do you have Enduring Powers of Attorney in place? If not, you may care to read on to see what could be a likely scenario in the event of your losing mental capacity for any reason, be it old age or an unforeseen accident or illness.

Firstly, you might ask “What is an Enduring Power of Attorney?” Pursuant to an Act of Parliament called ‘The Protection of Personal and Property Rights Act 1988′, every person is able to put in place types of power of attorney known as Enduring Powers of Attorney. These powers of attorney come in two forms, one for personal care and welfare and a second, for property matters. In relation to our personal care and welfare, we can only appoint one attorney at any given time, but in relation to our property matters, we can appoint two or more if so desired.

The distinct difference between these types of power of attorney and a ‘traditional’ power of attorney is that as the word ‘Enduring’ suggests, the Enduring Power of Attorney remains in full force and power if for any reason we lose mental capacity. Any other type of power of attorney ceases to be of effect on loss of mental capacity.

If you are thinking that you’ve heard all this before, you might care to stop and think for a moment, what happens if you lose mental capacity for any reason and you do not have Enduring Powers of Attorney in place! The Protection of Personal and Property Rights Act anticipates this situation, and provision is made in the Act for an application to be made to the Family Court for someone to be appointed as either a personal welfare guardian or a property manager.

However, whereas it might cost you around $400 – $500 per person to put in place Enduring Powers of Attorney for property and personal care and welfare whilst you are of sound mind, if application has to be made to the Court, following your sudden or unexpected loss of mental capacity, the costs are likely to be dramatically higher. Why is this and how much could it cost you might ask?

The simple answer is that it can cost several thousands of dollars to put in place arrangements, which could have been made for a fraction of that price with a little foresight. The reason for this is that in circumstances where an application to the Court is necessary, not only do you have a solicitor representing the person making application to be appointed as welfare guardian and/or manager, but there is also an independent solicitor appointed by the Court to represent the person for whom the power of attorney is required. A percentage (usually half) of that independent solicitor’s fees are usually met from a Government Consolidated Fund, but the remainder must be paid out of your own funds.

Before making an appointment as welfare guardian or manager, the Court must be satisfied that there is a genuine loss of mental capacity and it is necessary to seek medical opinions and a report is then filed with the Court by the independent solicitor. If the manager is to have the ability to deal with property in excess of $120,000 in value, this requires the consent of the Court also.

Sadly, the expense does not necessarily stop once an order of the Court is granted, as the orders for appointment of manager and/or welfare guardian must be reviewed in the Court every three years, requiring the same process to be followed once again and further costs are incurred.

Because the costs involved in having a manager and/or welfare guardian appointed by the Court are considerable, there can sometimes be circumstances where it may not be appropriate to incur the expense. Take for example a situation where there is an obvious loss of mental capacity but the person does not have any significant property in their name. It might be argued in those circumstances that it ought not to be necessary to apply to the Court to have a welfare guardian appointed, particularly where there is a surviving spouse or partner.

Changes To Protection of Personal and Property Rights Law

Effective from the 26th of September 2008 significant changes to the law dealing with Enduring Powers of Attorney have come into effect.

The Enduring Power of Attorney regime first came into being with the passing of the 1988 Protection of Personal and Property Rights Act.

Over time limitations with this legislation became apparent with occasional abuse of the power of attorney by attorneys. Furthermore, upon loss of mental capacity by the Donor, there was no reporting requirement on the attorney.

In 2001 a report was published by the Law Commission which highlighted a number of potential areas of abuse of Enduring Powers of Attorney including:-

• Insufficient protection for the donor when making an Enduring Power of Attorney, particularly in relation to a donor not being properly advised when signing.

• Attorneys failing to consult with a donor to protect the interests of the donor.

• The fraudulent use of Enduring Powers of Attorney.

In 2007 an Amendment Act which modified the original Act in certain areas was passed and new prescribed forms came into effect on 26 September 2008. Some of the significant changes to the Act and the focus of the Enduring Powers of Attorney are as follows:-

• The Donor of the Enduring Power of Attorney must now have his or her signature witnessed by a solicitor or registered legal executive and the witness must be independent of the attorney. Therefore, if a lawyer acts for a husband and wife and they wish to appoint each other as attorney, then the Donor will need to be referred to another firm for independent advice. Whilst this will lead to increased costs, the hope is that the new requirements will lead to better protection for Donors at the time of appointment of an attorney.

• The new prescribed form for the appointment of a property attorney contains certain options which did not form part of the old forms.

• One such option is for the appointment of a successor attorney where the appointment of an attorney has ceased.

• Another option allows for the donor to require the attorney to consult with certain specified people in exercising their power – these might include a spouse or other siblings where one of your children is appointed as your attorney.

• The Donor can also require the attorney to provide specific information relating to the exercise of the Enduring Power of Attorney to a nominated person or persons if those people request such information.

• If the Donor wishes the attorney to be able to benefit themselves or other specified persons after the donors loss of mental capacity this can also be specified in the Enduring Power of Attorney.

The Amendment Act also places a requirement on the witness to sign a certificate certifying that they have witnessed the execution of the Enduring Power of Attorney, they are either a practicing lawyer or registered legal executive, that they have explained the effect and implication of the Enduring Power of Attorney and that the Donor had mental capacity when they signed the form.

Notwithstanding that the new requirements will lead to increased costs, an Enduring Power of Attorney is a valuable document. The alternative if one loses mental capacity and does not have an Enduring Power of Attorney is an application to the Family Court and likely cost about $2,000 – $3,000.