It is prudent to have your affairs in order, no matter what your
current age or health. None of us can predict when we might be
affected by an unexpected injury or illness, and it is far wiser to
be prepared now than to rely on arrangements that might be made on
your behalf in the future.
In NSW there are two main ways you can make financial
arrangements; a person can either utilise a number of informal
arrangements which he or she puts in place (possibly with or
without the assistance of family depending on the person's own
capacity) or someone may apply to have a financial management order
made on behalf of an incapable person.
Both the Supreme Court and the Guardianship Tribunal have powers
under State legislation to make financial management orders so that
a person's financial affairs are subject to financial
management under the NSW Trustee and Guardian Act 2009.
Financial managers have wide powers to contract on behalf of and
deal with property of an incapable person. The protected
person's right to deal with his or her own property is
suspended while the order is in place. It is for this reason that a
financial management order will generally only be made if there is
some goal which cannot be achieved by informal means and it is in
the interests of the incapable person to do so.
If an incapable person owns a house or large investments,
financial management should be considered. Whereas where the
incapable person's sole asset is a small bank account and his
or her sole income is the pension, an application for financial
management will generally not be required.
When should you use an informal
Having an informal arrangement made now means you have peace of
mind and will be sufficient in most circumstances for payments of
day-to-day expenses and bills. Informal arrangements are usually
less expensive to put in place and more convenient for the person
acting on behalf of an incapable person. However, there may be
risks with informal arrangements, such as the person with authority
not acting honestly or in the best interests of the incapable
What are your options for informal financial management
Appointing alternative signatories to bank accounts.
A person could make a trusted family member or close friend a
signatory of their bank account.
Arranging for the payment of the incapable person's pension to
The Secretary of the Department of Human Services is empowered
by Commonwealth legislation to authorise the whole or part of a
person's age and disability support pensions to be paid to a
person on behalf of a pensioner. The "payment nominee" is
usually a relative of a mentally incapable person.
Making an Enduring Power of Attorney.
A person with the requisite level of mental capacity can make a
power of attorney which enables the attorney to deal with that
person's affairs within the terms set out in the power of
attorney. As a general rule, if a person executes a power of
attorney and then subsequently becomes mentally incapable, the
power of attorney is terminated. However, an enduring power of
attorney enables the attorney to continue to act despite the
subsequent mental incapacity of the person who made the power of
What happens if a loved one is already incapable or the
informal arrangements do not work out?
Where informal financial management arrangements are not working
appropriately an application may need to be made for a financial
management order. Either the NSW Trustee or anyone else who has a
genuine concern for the welfare of a person may apply for a
financial management order.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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