Independence and the Enduring Power of Attorney

by | Oct 14, 2010 | Trusts

Independent Witnesses – What the Law Requires

Statute imposes specific obligations on how a  power of attorney is to be signed and witnessed.  In 2008 changes were made to the legislation that enabled the giving of enduring powers of attorney.  The changes were intended to protect the people granting powers of attorney from being coerced into doing so. Amongst other things, they required the witness of the person giving the power of attorney to be independent of the person to whom the power of attorney was to be given.

The unexpected outcome of these changes was to stop people granting enduring powers of attorney.  It became apparent that instead of being a relatively simple exercise, the cost of completing the enduring powers of attorney was prohibitive.  People simply did not want to spend $1,000 on signing these simple documents and that was what it was costing by the time independent lawyers were used.

Mutual Powers of Attorney

What followed recently was a further change to the law.  This change covers the circumstances where people give mutual powers of attorney.  It is common for example for a husband and wife to create enduring powers of attorney in favour of each other.

The law now recognises that the 2 witnesses can be people from within the same law firm.  This concession does not derogate from the need to be independent, however, and independent advice will still need to be given to each of the people giving the power of attorney.  It is just that the statute recognises that those 2 independent lawyers may work at the same firm.

Appointing an Alternate Attorney

It is common for people to appoint their spouse as attorney but to provide for another person, particularly a child of theirs, to be attorney in the event their spouse is unable or unwilling to act.  This circumstance is not covered by the change to the legislation and the law still requires separate law firms to be used.  Although one law firm can be used for the husband and wife who are giving the mutual powers of attorney a separate firm must be used for the recipient of the power.

There is another twist in the legislation.  If a lawyer in the firm that acts for the husband and wife has previously acted as the third party’s lawyer then that law firm cannot act as the donor’s witness and advisor.  So if mum and dad wish to give each other power of attorney with an alternative power of attorney given to their eldest child and if the law firm has previously acted for the eldest child, mum and dad will need to go to another lawyer.  This is irrespective of whether the law firm has acted for mum and dad in the past.

Is it overkill in the attempt to protect people from coercion?  Perhaps.  It is certainly difficult to understand.  However, these are the witnessing requirements that we will need to comply with until any change is made to the law.  A review is set down for 2013.

By Debra Dorrington