Cascading Power of Attorney & Mutual Power of Attorney

Why get a Mutual Power of Attorney or Cascading Power of Attorney?

Sadly, your spouse gets Alzheimer's disease at 55 years of age. You decide that you want to sell the large family home and buy a smaller home closer to amenities that can help your spouse.

The family home is in both your names. Your spouse no longer has the mental capacity to sign documents. You have no power of attorney, therefore, your only option is to apply to the Guardianship and Administration Board for permission to sell the home.

During this court procedure you are forced to make your children swear in court that you are not a spendthrift. Other people such as friends, other family members and even neighbours are contacted to see whether they support your application. At the hearing you are cross examined as to whether you are a good person to look after the affairs of your wife or husband.

Eventually this government department tells you that you are allowed to sell your home. However, it directs you to hold your spouse’s half of the proceeds in a separate bank account and pay you some money each week to look after your wife or husband. The department insists you keep accurate records of what you spend, even down to the toiletries for your spouse.

Without all the proceeds of the sale of the home you can not afford to buy another property.

This problem would have been prevented if you and your spouse had given each other a Mutual Power of Attorney.

What is a power of attorney?

A power of attorney gives someone the authority to do things on your behalf - "You stand in their shoes." For example, the person you appoint can sell and buy another home on your behalf. With a power of attorney you don't need to keep running off to a government department to get permission to do something.

Why is it ENDURING?

The power of attorney is enduring if it operates when you are of unsound mind.

Why is it CASCADING?

A power of attorney is cascading if it has back up people to act as your attorney. For example, you may appoint your spouse and then up to two of your children if you become of unsound mind.

When does the power of attorney take effect?

You have a choice of when the enduring power of attorney can come into effect:

• you can make the power of attorney come into effect from the moment it is signed (common for husband and wives); or
• it can come into effect only when you become of unsound mind (common for children).

How hard is it for my attorney to prove that I am of unsound mind?

Your attorney must prove to a government official that you are unable by reason of mental disorder to make reasonable judgements.

Most people make a Mutual Power of Attorney that comes into effect immediately with their spouse. If they become of unsound mind then it comes into effect for 1 or 2 of their children as well.

When can I make and revoke the power of attorney?

While you have the mental capacity you can make and then revoke your power of attorney at any time.

If there is doubt about your legal capacity speak to your doctor. Your doctor can give you a note stating that you are competent to sign.

Who do I appoint as my attorney?

Your attorney has to be over 18 years of age. It should be someone you trust. People often appoint their spouse and then up to 2 children.

What are the attorney’s duties?

Your attorney must:

• act in your best interests at all times;
• act honestly and protect your assets;
• prepare and keep records of all dealings and transactions; and
• not renounce a power during any period of your legal incapacity, except with the permission of the Public Guardian.

Where do I register the power of attorney?

There is no need to register or stamp the power. It is effective once properly signed. However, before you can buy or sell real estate in most states under the power you must register it with the Office of Titles.

The Department of Land Administration charges for this privilege. People therefore often only register the power when they are going to deal with real estate. You can register the power at any time. However, after 3 months your attorney has to swear that the attorney remains unrevoked.

Can I prepare an enduring power of attorney myself?

You can make an enduring power of attorney yourself using prepared forms. However, there are a number of dangers with Power of Attorneys not made by a lawyer working in this area of law.

Employees of the Office of Titles have stated that the formalities of preparing, executing and witnessing Power of Attorney frequently contain errors. Our experience confirms this to be true.

The problem is that you often only find out about the deficiencies when it is too late to prepare and sign another power of attorney.

If a person helps you to prepare a Power of Attorney and it is wrong then you may be able to sue the person who gave you the help. While you should talk to your Accountant and Financial Adviser on the powers you need in a power of attorney, only a lawyer can professionally give you advice on preparing a power of attorney document itself.

What does it cost to have a professionally prepared power?

We often charge a fixed fee to prepare your enduring power of attorney. Please have your Lawyer, Accountant and Adviser ring us for a quote. Our service includes:

• customising the powers in your power of attorney to suit your needs
• advising on whether your power of attorney should be Cascading and Mutual
• getting instructions over the phone, in person and by mail
• arranging for 2 of our Barristers to witness your power at our office
• unlimited advice on how to sign your power if it is signed out of our office and free checking of the power once it is signed
• at your request, free storage of your power of attorney in our safe custody

What if I don't worry about getting a power of attorney?

Then you are putting at risk your own and your family’s financial position. If you become of unsound mind then your family will have to apply to the Public Guardian for permission to carry out your financial affairs. The Public Guardian’s 1994 Annual Report said that:

"The increasing pressure on staff to respond to consumer needs, together with increasing management and accountability requirements, means that the time available for consideration and cross-checking of important information may be diminished. This, in turn, increases the likelihood of errors of judgement and/or simple human errors..."

Do you want to put your family through that pain?

The Public Guardian in Newsletter July 1994 said that such an application was:

"considerably more complex and involved than the simple taking out of an Enduring power of attorney. [An Enduring Power of Attorney is a] ..bit like insurance...something most people now recognised as being desirable and necessary to mitigate the effects of possible future trauma in their lives."

How do I revoke a Power of Attorney?

The easiest way to revoke any Power of Attorney is to tear up both copies. Usually your lawyer holds one copy of the Power of Attorney in your safe custody packet. Send a signed letter to your lawyer stating that the Power of Attorney is revoked and is to be destroyed. Your lawyer will then tear up the Power of Attorney they hold for you.

It is prudent to send a signed letter to your Attorney telling the Attorney that the POA is revoked and ask for all copies to be posted back to you. Provided your Attorney received the letter then it would be illegal for your Attorney to keep using the POA. Criminal sanctions can even apply. Also write to all banks and other people that have been presented with the POA. Keep copies of all such letters.

If you are concerned that the POA may still be used by the Attorney then you should send a letter to the Police and the Guardianship & Administration Board in your particular state. (In WA: Public Advocate, 10 William Street, Perth WA 6000) 

Sometimes the POA is registered at your local Land Titles Office (most POAs are never registered at Titles Office). If any of your POAs are so registered then attend at one of Land Titles offices with a copy of the POA. You will write on the POA "Revoked" on each page. Sign each page. This is witnessed (plus the witness address and job) and dated. Lodge this with Titles Office. Lodgement costs are usually under $100. You can lodge the "Revoked" POA even if the original POA has not yet been lodged at the local Land Titles Office. Why would you do this? Well, the Donee may still try and lodge the POA at the local Titles Office at a later time.

How do I get a Mutual and Cascading Power of Attorney?

Speak with your Accountant and Adviser. You may require other Estate Planning support, such as a Three Generation Testamentary Trust Will. You need the advice of all professionals to make sure you get maximum support.
Civic Legal is a private law firm. We don't take clients off the street.
Your Lawyer, Accountant or Adviser are welcome to contact Civic Legal' Practice Manager on - 08 9460 5000. For more information in this area see our Manuals on: Estate Planning and information form: Inheritance Tax Planner and Mutual & Cascading Power of Attorney Instruction Form.