Adult children who are beneficiaries in your Will may feel they have the right to access their parent’s assets before their parents have died. There is an increase in ‘entitled’ adult children acting as an Attorney for their parents and using the assets for their own benefit. Most adult children don’t realise this conduct is illegal and simply think it is just using their inheritance a little earlier than expected! Attwood Marshall Lawyers Legal Practice Director, Jeff Garrett, recently joined Robyn Hyland on Radio 4CRB to discuss what to consider when making an Enduring Power of Attorney, including who you should appoint to act as your Attorney, and what you can do to stop adult children from misusing their position.
Evidence suggests that financial abuse is one of the most common forms of elder abuse in Australia, and unfortunately, in a large number of cases, financial abuse has proven to be facilitated through the misuse of a Power of Attorney by family members, especially the adult children of parents.
As Australia’s population continues to age and our advances in medicine are keeping us alive longer, it is more important than ever before to help people understand the seriousness of putting in place an Enduring Power of Attorney (EPOA) if suddenly you fall ill, are injured, or suffer the onset of dementia and can no longer make decisions for yourself. However, equally important is making the vital decision of who is the best person or persons that you appoint in this powerful role. Many people do not realise the full legal consequences of appointing someone as your Attorney. They legally step into your shoes after the document is signed and can sign anything that you can and make any decisions as to your financial and medical affairs as they see fit.
Although you can download a power of attorney prescribed form from most state or territory government websites, it is very important that you fully understand the legal effect of signing that document. There is a very good reason the word ‘Power’ is used – it gives great power to the attorney! You should therefore be very careful about what powers you give to your attorney/s and make sure you get proper legal advice from an experienced estate planning lawyer about the terms and conditions of the EPOA and who you should appoint (or more importantly, who you should NOT appoint!).
Enduring Power of Attorney documents – what to consider
When should the EPOA become active – after you lose capacity or immediately?
An Enduring Power of Attorney has a unique quality in that it allows the ‘principal’ (the person making the EPOA) to choose someone (or several people) to make financial, lifestyle and health-related decisions on the principal’s behalf should they lose the mental capacity to make decisions for themselves. However, it is not always the case that the EPOA comes into operation after you lose mental capacity. In many cases, people decide to make their EPOA’s active ‘immediately’! What they may not realise is that an immediate appointment enables the appointed Attorney to act in that capacity as soon as the document is signed and is not subject to you losing capacity. Most people are not aware of this, nor is it properly explained to them when they sign the EPOA. This should be something you check if you already have an EPOA in place.
Sometimes, you may need an ‘immediate’ appointment and many couples do this to make signing for each other easier. It is handy to have if you are away or cannot sign due to an injury etc. However, it gets a little more difficult if you separate and suddenly lose capacity and cannot change the document. Your now ex-spouse or partner can sign for you without any restrictions! However, the most common decision is for the EPOA only to come into operation or become active if the principal has lost mental capacity to handle their own affairs. This can also be a very complex issue as to whether someone has lost capacity and another reason why you should obtain proper legal advice from an experienced estate planning lawyer before signing such a powerful document!
Who should you appoint as your Attorney/s?
The following eligibility criteria will apply when selecting an Attorney:
- An Attorney must be over the age of 18 years
- An Attorney should be located nearby. Appointing someone who lives overseas or a significant distance away may present difficulties come the time that person needs to step in and start managing the principal’s affairs.
- An Attorney must not be an undischarged bankrupt.
- An Attorney must have the capacity to make decisions they are appointed for.
- An Attorney cannot be someone who is a paid carer of the principal, or not have been their carer in the past three years.
- An Attorney cannot be someone’s health provider or service provider in a residential service where they live.
Many people anguish over the decision of who to appoint as their Attorney when completing these types of documents.
This can be especially the case when a parent has 2, 3 or even 4 adult children and they want to appoint all children to act jointly or equally so that their decision is considered “fair”.
If their children do not get along, are unable to make decisions together, or do not have their parent’s best interests at heart, this can be a recipe for disaster.
The best way to protect yourself is to have your EPOA drafted by an experienced estate planning lawyer and incorporate the terms and conditions that you want applied to your affairs into the document. You also need to think very carefully about who you should appoint and if appointing multiple family members will be suitable. Sometimes it may be appropriate to appoint an independent professional as a co-attorney with a family member to make sure they do the right thing. An independent professional can be an accountant, lawyer, or financial planner, or a private trustee company.
It is an extremely serious offence to not comply with the law when it comes to acting as someone’s Attorney. An Attorney must always act in the best interests of the principal and never intermingle the principal’s assets with their own. However, that’s not to say this does not happen, and it is particularly prone to happen when you appoint your adult children. With property prices going up, the cost of living on the rise, many people are feeling mortgage stress and financial pressures. When an adult child has access to their parent’s money and assets, they may be enticed to access those funds to help them meet their own financial needs. They usually don’t even realise they are doing anything ‘wrong’ or illegal and can see it as just an advance on their inheritance.
This is not to say that you should not consider your adult child or children to fulfil this very important role. Most parents trust their adult child or children implicitly. It is just something you should consider and carefully weigh up your options and get some helpful advice from an experienced estate planning lawyer. It could save you and your family a lot of stress and anguish, not to mention the legal fees if a dispute arises or the Tribunal has to intervene later on (e.g., QCAT, NCAT etc.) which could lead to the possible appointment of the Public Trustee to handle your financial affairs! It has been well publicised and documented as to the issues of mismanagement and neglect of Public Trustees across the nation, so this is absolutely something you want to avoid.
Being an Attorney for someone is a very onerous and time-consuming task, particularly if the person’s affairs are complicated. You need to make sure whomever you appoint is up to the task and is completely trustworthy.
What safeguards are in place to stop Attorneys from misusing their power?
There is no doubt that additional safeguards are needed in Australia to help protect vulnerable people from elder abuse and financial abuse, particularly when someone is misusing a Power of Attorney.
Unfortunately, when an Attorney misuses their power, it may only come to light when a third party identifies red flags.
To address the lack of safeguards in place, the Australian Law Reform Commission completed a report last year and recommended a number of reforms to address financial elder abuse when a Power of Attorney is in place.
- Adopting nationally consistent safeguards that seek to minimise the risk of abuse of an Enduring Power of Attorney document
- Giving tribunals jurisdiction to award compensation when duties under an Enduring Power of Attorney document have been breached; and
- Establishing a national online registration scheme for Enduring Power of Attorney documents.
In the absence of a national online registration scheme for Enduring Power of Attorney documents, and no real accessible data source to establish whether an Enduring Power of Attorney document is valid or if it has been superseded, transactions which are technically no longer allowed may continue to be made.
Only time will tell whether the introduction of a national online registration scheme would reduce the prevalence of financial elder abuse, however, we believe this will be a step in the right direction to better protect the interests of those most vulnerable.
What to do if you suspect an Attorney is misusing their power
If someone has knowledge of an Attorney doing the wrong thing, then there are a few options available to take action.
The first option is to make a complaint to the Public Guardian.
When a complaint is reported to the Public Guardian, they will investigate the matter to determine what action needs to be taken and if an Attorney is acting in good faith.
If there is evidence that the Attorney is not acting in the best interests of the principal, the Public Guardian will make an application to the Tribunal in the relevant state, which in Queensland is the Queensland Civil and Administrative Tribunal (QCAT), and in New South Wales it is the New South Wales Civil and Administrative Tribunal (NCAT).
In most cases, the Tribunal will then appoint the Public Trustee to take over as financial administrator to look after the person’s affairs.
The dangers of the Public Trustee acting as financial manager is well-publicised, and it is widely known that they do not necessarily do a very good job of managing people’s affairs.
Read more: Public Trustee’s neglect and deliberate isolation of vulnerable people exposed by Four Corners investigation across Australia
Read more: QLD Public Advocate Review exposes Public Trustee’s failings and conflicts of interest
Read more: Families forced to take legal action against Public Trustees
Anyone who intends to make a complaint to the Public Guardian should proceed with caution. The Public Guardian receive a large number of complaints each year and it can take a long time for them to investigate each matter.
Sadly, there have been many matters where the person who is the principal of a Power of Attorney has passed away before the Public Guardian’s investigation have completed.
An alternative option is to consult a lawyer who is experienced in this complex area of law to look into the matter. An interested party who believes an Attorney is misusing their power can make an application with the support of a suitably qualified lawyer, to the Tribunal in their relevant state, to have the Attorney removed, and to propose an alternative Attorney to take their place.
If the Tribunal finds that the Attorney has misused their power, the Attorney could also face consequences such as:
- criminal liability — failing to act honestly and with reasonable diligence as an attorney is a criminal offence
- paying compensation — QCAT, NCAT, or the Supreme Court can order an attorney or former attorney to compensate the principal or their estate for any loss caused by their failure to comply with their obligations
- accounting for profits — QCAT, NCAT, or the Supreme Court can order the attorney or former attorney to account for any profits they gained as a result of their failure to comply with their obligations
- other remedies against your attorney — QCAT, NCAT, or the Supreme Court can make other orders against an attorney or former attorneys, including requiring them to perform certain actions.
Attwood Marshall Lawyers – providing trusted advice to ensure your best interests are protected
An Enduring Power of Attorney is one of the most powerful documents you can ever put in place and should not be underestimated.
It is always best to seek advice from an experienced estate planning lawyer in relation to who to appoint as your Attorney, what instructions to include in the document, and when the document should come into effect.
The process of making an Enduring Power of Attorney, or Appointment of Enduring Guardian (NSW) is quite simple, and by doing so, will give you peace of mind that someone you trust implicitly has your back when you need them most.
To make an appointment with an estate planning lawyer to discuss Enduring Power of Attorney documents and other estate planning tools, contact our Wills and Estates Department, Donna Tolley, on direct line 07 5506 8241, email email@example.com or free call 1800 621 071 anytime.
You can also make an appointment with any of our lawyers by visiting our website and using our online booking app. Our lawyers are available to meet with you at any of our conveniently located offices at Coolangatta, Kingscliff, Robina Town Centre, Brisbane, Sydney, or Melbourne.
What happens if you lose mental capacity and can no longer make decisions for yourself? How to choose a guardian to make decisions about your medical treatment or lifestyle choices and what to do if you are concerned about a loved one’s mental capacity