Attwood Marshall Lawyers Legal Practice Director Jeff Garrett joins Robyn Hyland on Radio 4CRB to discuss a recent QLD case that highlights the importance of having an Enduring Power of Attorney, and the types of decisions an attorney can make under this powerful document. If someone wishes to give their attorney certain powers to make ‘conflict’ transactions, there are ways to plan ahead to ensure that person will have the flexibility to do as you wish without disputes arising.
What is an Enduring Power of Attorney (EPOA) and why is it so important?
Enduring Powers of Attorney are extremely powerful estate planning documents that allow you to appoint someone that you trust to be able to make all the decisions you can make should you lose capacity to be able to make such decisions for yourself.
An Enduring Power of Attorney is often considered more important than a Will in the context of estate planning as it is a document that comes into effect while you are still alive and gives someone an incredible amount of power to be able to make far-reaching decisions on your behalf.
Many people believe needing to appoint an attorney is not something they need to worry about because they are fit and healthy “today”. But there are any number of reasons why someone may lose capacity suddenly, at any age. As we are living longer and living fuller lives, every day we run the risk of something unexpected happening. From being involved in a motor vehicle accident or work accident and suffering a brain injury, suffering from a mental health illness, a stroke, or cognitive impairment from an illness like dementia, these may not be things we can predict; however, we can plan for as a safety measure.
What is a conflict transaction?
In Queensland, the law relating to EPOA’s is contained in the Powers of Attorney Act 1988. Section 66 of the Act sets out the obligations of an attorney to act ‘honestly and with reasonable diligence to protect the principal’s interests.’ Section 73 of the Act provides an overview of avoiding a conflict transaction and S. 73(6) defines a conflict transaction with examples:
(6)A conflict transaction is a transaction in which there may be conflict, or which results in conflict, between—
(a)the duty of an attorney towards the principal; and
(b)either;
(i) the interests of the attorney, or a relation, business associate or close friend of the attorney; or
(ii) another duty of the attorney.
Examples:
- 1A conflict transaction happens if an attorney for a financial matter buys the principal’s car.
- 2A conflict transaction happens if an attorney for a financial matter lends the principal’s money to a close friend of the attorney.
- 3A conflict transaction happens if an attorney for a financial matter rents the principal’s residential property to the attorney or a relative of the attorney.
- 4A conflict transaction happens if an attorney for a financial matter uses the principal’s money to pay the personal expenses of the attorney, including, for example, the attorney’s personal travel expenses.
- 5A conflict transaction happens if an attorney for a financial matter buys the principal’s house.
- 6A conflict transaction does not happen if an attorney for a financial matter is acting under section 89 to maintain the principal’s dependants.
When executing an Enduring Power of Attorney, you must carefully consider who is the most appropriate person or persons to act as your attorney, if you want to appoint more than one attorney and if co-attorneys will be able to get along and make decisions together in your best interests. You must also consider if there are special clauses that need to be included so that your attorneys have the authority to make decisions that would otherwise not be allowed. For example, selling the family home in order for an elderly parent to transition to care can upset the adult children who may have been left the property in the Will. It can be even worse if a family member wishes to buy the home. Usually, these types of transactions involve a conflict for the attorney and can be challenged. By carefully planning for future events and including these issues in the EPOA, the likelihood of a court dispute is far less.
Whoever you appoint to be your Enduring Power of Attorney will ultimately step into your shoes and do everything you can do legally, including sign documents, withdraw money from bank accounts, sell assets, or make decisions about where you live and the treatment and care you receive.
Attorneys and conflict transactions – an example case
When completing an Enduring Power of Attorney, it is important to concentrate on conflict situations that may arise and get advice around crafting clauses that may be necessary to pre-empt future decisions that will need to be made on your behalf.
The case of BP v PM [2022] QSC 268 is a great example of how failing to craft clauses to allow your attorney to enter conflict transactions can cause disputes to arise and costly litigation to ensue.
Here’s a brief overview of how the case unfolded.
A 93-year-old mother (Victoria) of five children had appointed one of her daughter’s (Bernadette) and her husband (Wilhelmus), to be her co-attorneys for financial and personal/health matters. The Enduring Power of Attorney was executed in 2010. Victoria was diagnosed with Alzheimer’s and vascular dementia in 2017 and her health declined over the years, resulting in her moving into an aged care facility in 2019, with no prospect of returning to her home, a small cattle property at Barrine on the Atherton Tablelands.
With Victoria permanently residing in an aged care facility, her husband Wilhelmus initiated steps to liquidate several of the couple’s assets, though the farm they had lived in remained untouched. Wilhelmus had intended the farm to remain in the family and one of his children to acquire it.
Wilhelmus died in 2020 leaving Bernadette to be the only surviving attorney to act for her mother.
Bernadette continued to liquidate assets, including selling other properties owned by Victoria.
Bernadette received financial advice from her parent’s accountant of 31 years, who explained to her that her mother would gain a significant tax benefit by selling the family farm whilst she was still alive.
Bernadette wanted to fulfil her late father’s wishes to keep the farm in the family by selling it to one of her siblings who was already heavily involved in farming. However, selling the farm was not something she could do without it being considered a conflict of interest.
As the Enduring Power of Attorney did not have any clauses that stipulated the attorney had this power, Bernadette had to seek authorisation of the Supreme Court to enter in the conflict transaction.
Two of the siblings consented to the application to sell the property, but the two remaining siblings opposed the sale.
The Supreme Court Judge considered that the sale satisfied the principles identified in the Powers of Attorney Act 1998 and exercised his discretion to authorise the sale. The Court identified that it was in the best interests of Victoria for the property to be sold.
Despite the positive outcome for Bernadette who was able to proceed with selling the farm and ensuring her mother’s financial interests were met, the application to have the matter heard in the Supreme Court likely cost anywhere from $50,000 to $100,000 to reach that conclusion.
Had the Enduring Power of Attorney been drafted with the future in mind, it could have had the appropriate clauses included to allow the transactions to take place without disputes arising.
It can be very difficult to know what contingencies may need to be put in place. This is where the value lies in seeking advice from an experienced estate planning lawyer. When you sit down with an estate planning lawyer, they will discuss your family circumstances, your plans for the future, and assets that you own, to be able to ensure anyone being appointed as attorney can make decisions that align with your plans, helping you foreshadow issues from arising.
A warning when appointing multiple attorneys – choose wisely!
It is not uncommon for parents of adult children to appoint multiple children to be attorney under an Enduring Power of Attorney. However, when doing so, the individual often overlooks the relationship and dynamic between the children. If the children do not get along or have conflicting views, this can result in an inability to move forward and make decisions in the best interests of the individual. From one attorney being accused of taking money from a parent to another wanting to move mum or dad to another state to be closer to them, there are any number of issues that can arise which can result in the matter escalating to be heard in front of a Tribunal.
In most cases if an attorney dispute ends up in QCAT (Queensland Civil Administrative Tribunal), NCAT (New South Wales Civil Administrative Tribunal), or the equivalent in other states and territories, the Tribunal will order that the Public Trustee take over the management of the individual’s affairs.
As we know from countless inquiries and reports exposing the Public Trustee for mismanagement, charging exorbitant fees, and maladministration, anyone who falls under the Public Trustee for financial management and guardianship is often not looked after as they should be and the loved ones who want to continue to participate in the care of their relative are left in the dark.
Read more: Why the Public Trustees across Australia need a complete overhaul
Attwood Marshall Lawyers – helping people plan for the future and preserve their wishes
Attwood Marshall Lawyers have one of the largest, most experienced Wills and Estates departments in Australia, with dedicated teams who practice exclusively in estate planning, estate litigation, and estate administration.
We want to ensure the message is heard loud and clear just how important Enduring Powers of Attorney are. Everyone, no matter their age or health status, must have this document in place to plan for the unexpected and have confidence that their best interests will be protected if someone must make decisions on their behalf.
For assistance to draft an Enduring Power of Attorney, or update your Will and other estate planning documents, please contact our Wills and Estates Department Manager Donna Tolley on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or book an appointment with one of our estate planning lawyers instantly using our online booking app.
If you are an attorney involved in a dispute and need assistance, we have a dedicated estate litigation department who can help you. For dispute resolution enquiries, please contact Amanda Heather on direct line 07 5506 8245 or email aheather@attwoodmarshall.com.au
