Understanding Power of Attorney Before an Aged Care Crisis

Power of Attorney is one of the most important legal documents in aged care planning -yet many families don't establish it until crisis hits. By then, if your parent has lost mental capacity, it may be too late to put this protection in place.

I see families every week who face unnecessary legal complexity, delayed Centrelink applications, and frozen financial accounts because Power of Attorney wasn't arranged in advance. In some cases, families must apply to tribunals for guardianship - a costly, time-consuming process that could have been avoided with proactive planning.

This guide explains what Power of Attorney is, why it matters for aged care transitions, and how to establish it before it's urgently needed.

What is Power of Attorney?

A Power of Attorney (POA) is a legal document that allows your parent to appoint someone they trust - usually an adult child or close family member - to make decisions on their behalf if they're unable to do so themselves.

There are two main types of Power of Attorney relevant to aged care planning:

1. Financial (Enduring) Power of Attorney

This authorises your appointed attorney (the person named in the document) to manage financial and legal matters, including:

• Banking transactions and bill payments

• Property sales or purchases (including selling the family home to fund aged care)

• Centrelink applications and communications

• Investment decisions and superannuation management

• Aged care accommodation payments (Refundable Accommodation Deposit or Daily Accommodation Payment)

• Tax returns and financial planning decisions

An "enduring" Power of Attorney continues even if your parent loses mental capacity - this is critical for aged care planning.

2. Medical (Enduring Guardian or Medical Treatment Decision Maker)

This authorises your appointed attorney to make healthcare decisions if your parent can't, including:

• Consent to medical treatments

• Healthcare provider selection and facility placement

• End-of-life care decisions (in conjunction with Advanced Care Directives)

• Residential aged care or home care approvals

Note: The terminology varies by state/territory. Some jurisdictions use "Enduring Guardian" or "Medical Treatment Decision Maker" instead of Medical Power of Attorney. Your solicitor will use the correct term for your state.

Why Power of Attorney Matters for Aged Care

Without Power of Attorney, adult children cannot legally manage their parent's finances or make healthcare decisions - even in aged care emergencies.

Common situations where Power of Attorney becomes essential:

• Hospital discharge to aged care: Your parent is medically cleared for discharge but lacks capacity to sign accommodation agreements or financial forms. Without POA, the discharge is delayed.

• Centrelink applications: Applying for Age Pension or aged care subsidies requires detailed financial information. If your parent has dementia or cognitive decline, Centrelink won't accept your application without POA authorisation.

• Selling the family home: Funding aged care accommodation often requires selling the home. Banks, conveyancers, and real estate agents won't proceed with a sale without POA if your parent lacks capacity.

• Accommodation deposits: Residential aged care facilities require Refundable Accommodation Deposits (RAD) or Daily Accommodation Payments (DAP). You cannot access your parent's funds to pay these without POA.

• Banking and bill payments: If your parent is hospitalised or moves into care, their bills, mortgage, and financial obligations continue. Without POA, you cannot access their accounts to pay them.

When to Establish Power of Attorney

Power of Attorney must be established while your parent has mental capacity - the legal ability to understand the document and its implications. Once capacity is lost, it's too late.

Establish Power of Attorney:

• As soon as your parent is willing to consider it - ideally well before aged care is needed

• Before any cognitive decline begins (early-stage dementia may still allow for POA if capacity can be demonstrated)

• During retirement planning discussions - make it part of broader later-life preparation

• After a health scare that prompts planning conversations (but while your parent is still capable)

• When downsizing or moving into retirement villages - proactive timing prevents future complications

Don't Wait Until:

• Your parent is in hospital and unable to make decisions

• Dementia or cognitive decline has progressed significantly

• You urgently need to access funds or sell property for aged care

• A crisis has already occurred (by then, you may need tribunal guardianship instead)

How to Establish Power of Attorney

Power of Attorney is a legal document that must be completed correctly to be valid. Here's the process:

Step 1: Choose the Right Attorney

Your parent selects who will act on their behalf. This should be someone:

• Trustworthy with financial and personal decisions

• Capable of managing complex financial and legal matters

• Willing to act in your parent's interests (not their own)

• Able to handle the time commitment and responsibility

Your parent can appoint multiple attorneys (joint or severally) and specify backup attorneys in case the primary attorney cannot act. Discuss sibling dynamics and family relationships carefully when making this decision.

Step 2: Engage a Solicitor

While DIY Power of Attorney documents exist, engaging a solicitor ensures the document is legally valid, properly witnessed, and tailored to your parent's specific circumstances. Solicitors also assess mental capacity and provide evidence that your parent understood what they were signing - critical if the POA is later challenged.

Step 3: Complete the Document

The POA document will specify:

• Who is appointed as attorney(s)

• What powers the attorney has (financial, medical, or both)

• When the POA takes effect (immediately or only upon loss of capacity)

• Any conditions or restrictions on the attorney's powers

• Backup attorneys in case the primary cannot act

Step 4: Sign and Witness

Your parent must sign the document in the presence of independent witnesses (requirements vary by state/territory). The attorney also signs to accept the appointment. Proper witnessing is essential - an improperly witnessed POA may be rejected by banks, Centrelink, or aged care facilities.

Step 5: Register (if Required)

Some states/territories require Power of Attorney documents to be registered with a government authority. Your solicitor will advise on state-specific requirements.

Step 6: Store Safely and Share Copies

Keep the original POA document in a secure location. Provide certified copies to:

• The appointed attorney(s)

• Your parent's solicitor

• Your parent's GP (for medical POA)

• Financial institutions and aged care facilities when needed

What if It's Too Late to Establish Power of Attorney?

If your parent no longer has mental capacity and Power of Attorney wasn't established, you'll need to apply for guardianship or administration through a state/territory tribunal or court. This process:

• Takes weeks or months to complete

• Requires medical evidence of incapacity

• Involves tribunal hearings and legal fees

• May result in a public guardian being appointed instead of family

• Requires ongoing reporting and tribunal oversight

This is why establishing Power of Attorney proactively - before capacity is lost - is so important.

Common Questions About Power of Attorney

Can I use Power of Attorney to access my parent's bank accounts?

Yes - if the POA is activated and the bank has accepted a certified copy of the document. However, you must use their funds for their benefit, not yours. Misuse of Power of Attorney is illegal and can result in criminal charges.

Does Power of Attorney mean I control my parent's life?

No. Power of Attorney is a fiduciary role - you're acting on behalf of your parent according to their known wishes and in their interests. If your parent retains capacity, they continue making their own decisions. POA only activates when they cannot.

Can my parent revoke Power of Attorney?

Yes - as long as they have mental capacity, your parent can revoke or change their POA at any time by creating a new document.

Will Centrelink accept Power of Attorney?

Yes. Centrelink requires a certified copy of the POA document and may ask the attorney to register as a correspondence nominee. Our Centrelink Concierge Service handles this process on your behalf, ensuring all documentation is accepted without delays.

What's the difference between Power of Attorney and being added to bank accounts?

Being added as a joint account holder gives you access to funds, but it also means those funds are legally yours - which can complicate estate planning, Centrelink means testing, and aged care financial assessments. Power of Attorney gives you authority to act without ownership, keeping your parent's finances separate.

Power of Attorney and Aged Care Financial Planning

When families work with us at Olive Grove Financial Advice, we often discover Power of Attorney hasn't been established - or it was set up years ago and the attorney isn't prepared for the responsibility. Here's how POA intersects with aged care financial planning:

• Age Pension applications: We work with attorneys to gather financial information, complete Centrelink forms, and lodge applications on your parent's behalf.

• Accommodation payments: We help those designated POAs understand RAD vs. DAP options, structure payments to optimise Age Pension entitlements, and negotiate with aged care facilities.

• Asset restructuring: We advise nominated POAs on cashflow scenarios when considering selling the family home, how to structure investments, and strategies to minimise aged care costs while maximising pension entitlements.

• Ongoing management: Our Centrelink Concierge Service provides continuing support for attorneys managing Income Stream Reviews, asset changes, and ongoing compliance.

How Olive Grove Can Support You

If you hold Power of Attorney for a parent entering aged care, we understand both the legal responsibility and the emotional weight you're carrying. Our end-to-end service works with attorneys to navigate Centrelink, aged care providers, and financial complexity - so you can focus on supporting your parent through this transition with confidence.

Whether you're seeking aged care financial advice or help dealing with Centrelink, we're here to support you. Book a free call with Bill today to explore how we can help your family.