One of the most commonly overlooked aspects of aged care planning in Australia is also one of the most important. Without an Enduring Power of Attorney in place before a person loses the capacity to make their own decisions, families can face significant legal, financial and emotional barriers when aged care becomes necessary. Planning ahead while capacity exists is the only way to ensure these protections are in place when they are needed most.
| An Enduring Power of Attorney (EPOA) is a legal document that appoints a trusted person to make financial and legal decisions on someone’s behalf if they lose the capacity to do so themselves. In the context of aged care, an EPOA is essential for signing aged care agreements, managing accommodation payments, as well as handling financial affairs. It must be established while the person still has legal capacity. A financial planner can help families understand how an EPOA interacts with aged care costs, the means assessment and broader financial planning for later life. |
Quick summary
- An Enduring Power of Attorney (EPOA) appoints a trusted person to make financial and legal decisions on your behalf if you lose capacity
- An EPOA must be established while the person still has legal capacity, it cannot be created after capacity is lost
- Without an EPOA, families may need to apply to a tribunal for authority to manage financial affairs, which is costly and time-consuming
- A separate legal document covers medical and personal decisions, known as an Enduring Guardian or Medical Power of Attorney depending on the state
- The new Aged Care Act 2024 introduced registered supporters, but these are different from and cannot replace an EPOA
- An EPOA is needed to sign aged care agreements, manage RAD or accommodation payments and handle financial affairs on behalf of a person in care
- A financial planner can help the appointed attorney understand their obligations and manage financial affairs in line with aged care requirements
This article explains what an Enduring Power of Attorney is, why it is so important in the context of aged care, what happens when one is not in place and how a financial planner can support both older Australians and their families through this critical stage of planning.
What is an Enduring Power of Attorney?
An Enduring Power of Attorney is a legal document that allows a person, known as the principal, to appoint another person or persons, known as the attorney, to make financial and legal decisions on their behalf. The word enduring is critical: unlike a general power of attorney, an enduring power of attorney continues to remain valid even after the principal has lost the mental capacity to make decisions for themselves.
This is the fundamental reason an Enduring Power of Attorney is so important in the context of aged care planning. Aged care is often associated with cognitive decline, dementia, stroke or other conditions that can affect a person’s ability to understand, process and communicate decisions about their finances and care. An Enduring Power of Attorney ensures that a trusted, legally appointed person can step in and manage financial affairs without the need for court or tribunal intervention.
The decisions an attorney can make under an Enduring Power of Attorney typically include:
- Managing bank accounts and paying bills
- Signing aged care agreements and residential care contracts
- Managing investments, superannuation and assets
- Paying accommodation costs including Refundable Accommodation Deposits (RADs) or Daily Accommodation Payments (DAPs)
- Buying or selling property
- Dealing with government agencies including Centrelink and Services Australia
- Managing tax affairs and liaising with accountants and financial advisers
The difference between financial and medical decision making
A common source of confusion is the distinction between financial decision making and medical or personal decision making.
An Enduring Power of Attorney generally covers financial and legal decisions. Medical and personal decisions, such as consenting to treatment or making lifestyle and care decisions, are usually covered by separate legal documents. The terminology and requirements for these documents differ between Australian states and territories.
For this reason, it is important to obtain appropriate legal advice to ensure the correct documents are in place based on the state or territory where the person resides.
Why timing is everything
The single most important thing to understand about an Enduring Power of Attorney is that it must be established while the person still has legal capacity. Capacity means the ability to understand information about a decision, appreciate the consequences of making or not making that decision and communicate a decision.
Once a person has lost capacity, they can no longer legally create an Enduring Power of Attorney. At that point, if no EPOA is in place, the only option for family members seeking to manage financial affairs on their behalf is to apply to the relevant state or territory tribunal for authority to manage financial affairs. This process is:
- Time-consuming: applications can take weeks or months to be heard
- Costly: legal fees and tribunal application costs apply
- Uncertain: the tribunal will appoint whoever it considers appropriate, which may not align with the family’s preference
- Disruptive: in the meantime, financial decisions including aged care agreements may be unable to be signed or actioned
For a family navigating the stress of a loved one entering aged care under urgent circumstances, the absence of an EPOA can create significant practical and emotional difficulty on top of an already challenging situation.
The Better Health Channel, a Victorian Government health information service, notes that one of the key steps in planning for dementia and cognitive decline is ensuring an Enduring Power of Attorney is in place as soon as possible after any diagnosis, while the person still has the capacity to make that appointment.
How an EPOA works in an aged care context
When a person enters residential aged care, a number of legal and financial decisions need to be made quickly. These include signing the residential aged care agreement, arranging accommodation payments, notifying Centrelink and Services Australia of the change in living circumstances and managing ongoing financial obligations. If the person entering care does not have the capacity to sign these documents themselves, the EPOA holder steps in to act on their behalf.
Signing the aged care agreement
Every person entering residential aged care must sign a residential aged care agreement with the provider. This is a legally binding contract that covers the type of care to be provided, the fees payable and the rights and responsibilities of both parties. If the person entering care cannot sign this agreement due to loss of capacity, the EPOA holder or other legally authorised representative signs on their behalf. Without a valid EPOA, this process can become significantly complicated.
Managing accommodation payments
Aged care accommodation payments, whether a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP) or a combination of both, involve significant financial decisions that may require the attorney to assess the person’s assets, liaise with the aged care provider, manage property or investment sales, as well as making ongoing payments from the person’s funds. A well-prepared EPOA holder who has worked with a financial adviser in advance of care commencing is significantly better positioned to manage these decisions efficiently and in the principal’s best interests.
Liaising with Services Australia
The aged care means assessment conducted by Services Australia assesses the income and assets of the person entering care to determine their contribution toward care costs. The EPOA holder is often the person who provides information to Services Australia on behalf of the person in care and who manages any ongoing reporting obligations if financial circumstances change. A financial planner can assist the EPOA holder to understand what information is required, how assets are assessed and what strategies may be available.
Registered supporters under aged care reforms: not a replacement for an EPOA
Aged care reforms introduced the concept of registered supporters. A registered supporter is a person that an older Australian nominates to assist with communication and support in dealings with aged care providers and government agencies.
However, it is important to understand that a registered supporter is not the same as an Enduring Power of Attorney and cannot replace it.
A registered supporter may help an older person communicate, receive information or participate in decision making, but they do not automatically have the legal authority to make financial or legal decisions on behalf of another person.
Only a valid Enduring Power of Attorney or other legally recognised authority allows someone to make financial and legal decisions for a person who has lost capacity.
For families planning for aged care, this distinction is extremely important. Having a registered supporter arrangement in place does not remove the need for proper legal planning through an Enduring Power of Attorney.
Advance care directives: planning for medical decisions
Alongside an Enduring Power of Attorney, an Advance Care Directive is an important complementary document for aged care planning. An Advance Care Directive is a written record of a person’s preferences regarding future medical treatment and end-of-life care, made while they still have the capacity to express those preferences.
An Advance Care Directive can cover:
- Preferences regarding life-sustaining treatment
- Preferences regarding palliative and end-of-life care
- Instructions about specific medical interventions
- Values and beliefs that should guide medical decision making
- Preferences regarding where care should be provided
For families navigating aged care, an Advance Care Directive works alongside the EPOA and the appointed medical decision maker to ensure that a person’s wishes are known and respected even when they can no longer communicate them directly. The Aged Care Quality and Safety Commission encourages older Australians to have their advance care planning documents in order before they need care.
How a financial planner can help with aged care legal planning
A financial planner who specialises in aged care is often the first professional a family turns to when a loved one’s care needs change. While a financial planner is not a legal adviser and cannot prepare legal documents such as an Enduring Power of Attorney, they play an important complementary role in aged care planning that intersects directly with the legal framework.
Helping families understand the importance of early planning
A financial planner can help families understand why an EPOA needs to be in place well before aged care is required and what the consequences are if it is not. Having this conversation as part of a broader aged care financial planning discussion can prompt families to seek legal advice and put the right documents in place while there is still time.
Working with the EPOA holder after care commences
Once a person enters aged care, the EPOA holder typically becomes the primary contact for all financial decisions. A financial planner can work alongside the attorney to manage the financial aspects of aged care, including understanding accommodation payment options, assessing how assets and income are treated in the means test, structuring finances to manage cash flow and ensuring ongoing obligations are met. This is particularly important when the attorney is a family member with limited experience in financial matters.
Assessing how assets should be managed
The EPOA holder has a legal obligation to act in the best interests of the principal. When it comes to financial decisions relating to aged care, this includes making decisions about property, investments and superannuation in a way that supports the person’s care needs and financial security. A financial planner can provide the analysis and guidance to help the attorney make informed, well-documented decisions.
Coordinating with legal and accounting professionals
Aged care planning often requires a team of professionals working together. A financial planner can coordinate with solicitors who prepare the EPOA documentation, accountants managing tax obligations, aged care providers and government agencies to ensure that all elements of the financial plan are aligned and working together effectively.
Planning before capacity is lost
The most valuable time to engage a financial planner in aged care planning is before a crisis occurs. A proactive aged care financial plan developed while the older person still has capacity allows for genuine collaboration, informed decision making and a clear understanding of the person’s wishes and financial position. This makes the role of the EPOA holder significantly more straightforward when the time comes to act.
Frequently asked questions: Enduring Power of Attorney and aged care
| What is an Enduring Power of Attorney? | An Enduring Power of Attorney is a legal document that appoints a trusted person to make financial and legal decisions on your behalf if you lose the capacity to make those decisions yourself. Unlike a general power of attorney, it remains valid after capacity is lost. |
| Why is an EPOA important for aged care? | When a person enters aged care and cannot make their own decisions, someone needs to legally sign the aged care agreement, manage accommodation payments, liaise with Services Australia and handle financial affairs. Without an EPOA, none of this can happen without a costly and time-consuming tribunal application. |
| Can I set up an EPOA after I lose capacity? | No. An Enduring Power of Attorney must be created while the person still has legal capacity to understand and make the appointment. Once capacity is lost, it is too late to create one. |
| What happens if there is no EPOA when someone enters aged care? | Without an EPOA, family members must apply to the relevant state or territory tribunal for authority to manage financial affairs. This process can take weeks or months, involves legal costs and creates uncertainty during what is already a stressful time. |
| Does an EPOA cover medical decisions? | No. An EPOA covers financial and legal decisions only. Medical and personal decisions require a separate legal document, known as an Enduring Guardian, Medical Power of Attorney or Advance Care Directive depending on the state or territory. |
| What is the difference between a registered supporter and an EPOA? | A registered supporter under the new Aged Care Act 2024 can receive information and communicate on behalf of an older person in aged care dealings. However, a registered supporter cannot make financial or legal decisions unless they also hold a valid EPOA as a separate legal document. |
| How can a financial planner help with EPOA and aged care planning? | A financial planner cannot prepare legal documents, but can help families understand the importance of having an EPOA in place, work alongside the attorney after care commences, manage the financial aspects of aged care and coordinate with legal and accounting professionals to ensure all elements of the plan work together. |
| When should we put an EPOA in place? | As early as possible, ideally well before any aged care or health changes are anticipated. For anyone with a diagnosis of dementia or another condition that may affect cognitive capacity, the priority should be to seek legal advice and establish an EPOA immediately while capacity remains. |
Speak with a Paris Financial aged care expert
Planning for aged care is about more than understanding fees and funding arrangements. It requires a coordinated approach that brings together legal, financial and personal planning to ensure that older Australians and their families are protected and prepared.
At Paris Financial, our Private Wealth team includes advisers with specialist aged care expertise who can help you and your family understand the financial dimensions of aged care planning, work alongside your legal advisers to ensure all elements are in place and provide ongoing support as care needs and financial circumstances change.
| To speak with an aged care expert at Paris Financial, contact us on 03 8393 1000 or visit parisfinancial.com.au. |
Sources:
My Aged Care: Getting started with aged care: https://www.myagedcare.gov.au/
Services Australia: Getting aged care services: https://www.servicesaustralia.gov.au/getting-aged-care-services
Aged Care Quality and Safety Commission: Rights and responsibilities: https://www.agedcarequality.gov.au/older-australians/your-rights
Better Health Channel (Victorian Government): Dementia and early planning: https://www.betterhealth.vic.gov.au/health/conditionsandtreatments/dementia-early-planning
Department of Health and Aged Care: Registered supporters in aged care: https://www.health.gov.au/our-work/aged-care-act/about/registered-supporters?language=en
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General Advice Disclaimer
The information in this article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives. Whilst every care has been taken in the preparation of this article, Paris Financial Services Pty Ltd, its directors, authors, consultants, editors and any persons involved in the construction of this article, expressly disclaim all and any form of liability to any person in respect of this article and any consequences arising from its use by any person in reliance upon the whole or any part of this article.
