Powers of Attorney in Victoria: Why They Matter in Estate Planning

What a power of attorney is

A power of attorney is a legal document in which one person (the principal) authorises another (the attorney) to make decisions on their behalf. In Victoria the primary instrument is the enduring power of attorney under the Powers of Attorney Act 2014 (Vic). It is called enduring because, unlike a general power of attorney, it continues to operate after the principal loses decision-making capacity — which is precisely when it is most needed.

A separate instrument, an appointment of a medical treatment decision maker under the Medical Treatment Planning and Decisions Act 2016 (Vic), covers medical decisions. The enduring power of attorney under the 2014 Act deals with financial and personal (lifestyle) matters.

Why capacity is the central issue

Capacity can be lost gradually through dementia or another progressive condition, or suddenly through stroke, accident or serious illness. Without an enduring power of attorney already in place, an incapacitated person's bank accounts, superannuation, rental properties and tax affairs may become impossible to manage. The family's only remaining option is usually to apply to VCAT for the appointment of an administrator, which is public, slow and rarely results in the person the principal would have chosen themselves.

Signing an enduring power of attorney is a simple, inexpensive way of avoiding that outcome — but only if it is done while the principal still has capacity. Once capacity is lost, the document can no longer be made.

Financial decisions

A financial attorney can operate bank accounts, pay bills, lodge tax returns, sell or lease real estate, deal with investments, and generally do anything with the principal's money and property that the principal could lawfully do themselves. Broad powers create broad responsibility: the attorney is a fiduciary and must act honestly, avoid conflicts, keep the principal's property separate from their own, and keep proper records. Misuse of a financial power of attorney is one of the more common forms of elder financial abuse.

A carefully drafted enduring power of attorney should identify the attorney (or joint attorneys), set out how decisions are to be made where multiple attorneys are appointed, address conditions and limitations, and specify when the authority begins — immediately, or only on loss of capacity.

Personal decisions

The same instrument can appoint an attorney for personal matters — where the principal lives, who they see, day-to-day welfare and support arrangements. Personal decision-making is governed by the principles in the Act, including the obligation to give effect, so far as practicable, to the principal's known wishes and preferences. Personal and financial attorneys can be the same person or different people.

Business-owner considerations

For business owners a general enduring power of attorney is rarely enough on its own. The document should be drafted with reference to the actual structures through which the business operates — shareholder agreements, trust deeds, appointor provisions of family trusts, and the constitution of any sole director/sole shareholder company. Without those steps a proprietor's incapacity can leave the business functionally paralysed even where an attorney has been appointed. This is part of the same conversation as wills and estate planning and business succession.

How powers of attorney sit alongside the will

A will and an enduring power of attorney address different periods of life. The power of attorney operates while the principal is alive; it ceases automatically on death, at which point the executor named in the will takes over. In a well-designed estate plan the two documents are drafted together, by the same practitioner, using consistent information about assets, structures and intended beneficiaries. That coordination avoids the common problem of an attorney unwittingly frustrating the will — for example by selling an asset that was to have been gifted specifically, or by depleting a nominated superannuation balance.

The interaction with probate is direct. Where a principal has died, the attorney's authority ends and administration passes to the executor. For an overview of that transition see our probate in Victoria executor's guide, and for the underlying administration of the estate see probate and deceased estates.

Reviewing an existing power of attorney

An enduring power of attorney should be reviewed after any significant life event — marriage, separation, the death or incapacity of the appointed attorney, sale or acquisition of a business, or a move interstate. Documents made under earlier Victorian legislation continue to operate but may not reflect the current statutory framework. Where a family relationship has broken down and the attorney is a former partner or an estranged adult child, revocation and replacement should be treated as urgent.

Practical points

• Choose attorneys who are trustworthy, geographically available, and financially competent — not simply the eldest child.
• Consider appointing an alternative attorney to act if the primary attorney cannot.
• Where more than one attorney is appointed, decide whether they are to act jointly, severally, or by majority — silence on this point causes disputes.
• Discuss the appointment with the intended attorney in advance; nobody should learn of the role only when they are asked to act.
• Store the original in safe custody and tell the attorney where it can be found.

How Hanlons can help

We prepare enduring powers of attorney and medical treatment decision-maker appointments as a routine part of our wills and estate planning practice, and coordinate them with wills, superannuation nominations and business structures. Where an existing power of attorney is being misused or a family dispute has arisen about an incapacitated person's affairs, we can also advise on revocation, VCAT applications and the executor's position once the principal has died.