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10 April 2024

Enduring Power Of Attorney – responsibilities and risks

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HHG Legal Group

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HHG Legal Group has been serving Western Australians for over 100 years. With a large team across five offices, we offer top-notch legal advice and representation, exceeding expectations for all clients.
Responsibilities and risks involved in acting under an Enduring Power of Attorney. Links to more information.
Australia Family and Matrimonial
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HHG Legal Group Senior Associate, Alex Turner, has provided guidance on Enduring Power of Attorney – responsibilities and risks.

Responsibilities and risks – acting under an Enduring Power of Attorney

"An Enduring Power of Attorney ensures your decisions are respected, even when you can no longer voice them yourself."

As individuals, we make many decisions each day. Decisions about how we spend our money and how we manage what we have, simple decisions and more complex ones. We make these decisions having regard to our own unique needs and resources. We make decisions in accordance with our personal set of values.

There may come a time when we need to rely on others to help us to make reasonable decisions about our affairs. This time might come because of illness or disability. It might happen very quickly, or without warning.

An individual can, while they remain mentally competent, choose to make a legal document that appoints another or others who they wish to make financial and legal decisions on their behalf.

A Power of Attorney is a legal document where an individual (a "donor") gives another (their "Attorney") the power to exercise certain legal powers. This document can only be used while the donor continues to have legal capacity.

An Enduring Power of Attorney (sometimes shortened to "EPA" or "EPoA"), goes further – it is a legal document whereby an Attorney is appointed as substitute decision maker by the donor of the EPA to take over all decisions about financial and legal matters for the donor, even after that donor has lost capacity.

In Western Australia, there are formal requirements for an EPA to be valid. The law governing EPAs in WA is the Guardianship and Administration Act 1990 (WA) ("the Act"). The specific terms of the EPA are important.

You can find out more about making an Enduring Power of Attorney here:

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What are the legal obligations of an Attorney in Western Australia?

An EPA will only be effective where the appointment has been validly accepted by the Attorney. A person who has been asked to accept appointment under an EPA should give thought to whether it is something they are willing to do, as the appointment comes with considerable obligations. Also, a proposed Attorney should not accept an appointment as an Attorney unless they believe that the person making the EPA has legal capacity. If unsure, they might ask the person proposing to make the EPA to have their doctor assess and confirm that they have the capacity to make an EPA.

An Attorney's legal obligations are set out in the Act (at section 107). You can obtain a copy of the current version of the Act from the government website:

VISIT WEBSITE

The Attorney:

  • must exercise their powers as Attorney with reasonable diligence to protect the interests of the donor and, if they fail to do so, they are liable to the donor for any loss occasioned by the failure;
  • must keep accounts. These accounts do not need to be routinely passed (contrasted with a Private Administrator who must have their accounts passed by the Public Trustee annually), but need to be an accurate record and account of all dealings and transactions made under the EPA;
  • must not renounce their power under the EPA during any period of legal incapacity of the donor, except subject to section 109(2) of the Act which says that the State Administrative Tribunal ("SAT") can revoke or vary an EPA in certain circumstances; and
  • must advise SAT if they become bankrupt.

Examples of the duties and responsibilities of an Attorney include (subject to any limits contained in the EPA):

  • Managing assets including real estate
  • Recovering debts
  • Managing liabilities such as a home loan or personal debt
  • Collecting income including any pensions or rent
  • Maintaining and insuring real property
  • Purchasing or selling real property
  • Financing a move into aged care accommodation
  • Preparing and lodging tax returns
  • Carrying on a business
  • Managing inheritances or payments of death benefits payable to the person (ie from the estate of someone else)
  • Liaising with government bodies such as Centrelink on the person's behalf

An EPA does not give another the right to make decisions about personal matters such as medical treatment accommodation. These decisions can be made under a different legal document called an Enduring Power of Guardianship, or under a guardianship order made by SAT.

Trust and breaches of trust

What does it mean to say that an Attorney must exercise their powers to protect the interests of the donor?

The relationship between the donor of an Enduring Power of Attorney and the donee of that EPA is one where there is an expectation of trust – that the appointed person (the Attorney, not to be confused with the US term for a lawyer) will always act in the best interests of the donor and cannot profit from their appointment. This expectation is confirmed by the provisions of the Act.

Sometimes an Attorney acts inappropriately and breaches the relationship of trust. A breach might be accidental or deliberate.

Breaching trust can cause harm or distress to the donor and can deplete their estate during their lifetime. In some circumstances, misuse of an enduring power of attorney occurs within the context of elder abuse. Where there is a breach of trust, legal action against an Attorney is possible – to remove the Attorney's authority or to remedy damage caused or both.

What is the role of the State Administrative Tribunal in relation to Powers of Attorney?

SAT has the power to vary or revoke an EPA. Under the Act, SAT has other powers in relation to EPAs including to make a declaration that an EPA is valid and "in force" because the person who made the EPA does not have legal capacity. SAT can also require an Attorney to produce records about their use of an EPA.

SAT must make decisions in the best interests of any represented person, or of a person in respect of whom an application is made.

Under the Act, every person shall be presumed to be capable of:

  1. looking after his own health and safety;
  2. making reasonable judgments in respect of matters relating to his person;
  3. managing his own affairs; and
  4. making reasonable judgments in respect of matters relating to his estate,

until the contrary is proved to the satisfaction of the State Administrative Tribunal.

SAT can appoint a Guardian or Administrator for a person who can no longer make decisions for themself. SAT will not make a guardianship or administration order if the needs of the person in respect of whom an application for such an order is made could, in the opinion of SAT, be met by other means less restrictive of the person's freedom of decision and action. If a person has made an EPA validly before they lost legal capacity, SAT will not revoke that EPA unless it is in the best interests of the donor to do so.

SAT has the power to supervise the conduct of Attorneys to ensure that they fulfill their obligations to act diligently and protect the donor's interests. SAT will only scrutinise transactions undertaken pursuant to an EPA if there is something that requires an inquiry, or there is a sufficient basis for making an order for an audit of the accounts and records – it will not act on "mere suspicion". The orders SAT can make under the Act can only compel a party to produce documents and records that already exist, and if there is a sufficient basis, SAT can order that an audit of the information contained in those documents occur.

SAT is set up to be a user-friendly jurisdiction. However, parties can choose to be represented by a lawyer. Having a lawyer present might be appropriate where there are complex facts or where a party finds it difficult to follow the proceedings and understand the law. Costs orders are not usually made in matters brought to SAT under the Act.

When is use of a Power of Attorney unlawful?

An Attorney has a duty to the donor which is "fiduciary" in nature – the Attorney must not act in their own interests and must avoid conflict with the donor's interests, and the Attorney must not use their position to advance their own interests or profit from a transaction.

If wrongdoing by an Attorney can be established, such as a breach of the Attorney's fiduciary duty to the donor, then remedies can be pursued in the Courts – which one will depend on the nature and value of the specific claim against the Attorney.

Some examples of abuse of power include:

  • making gifts from the donor to family or friends – while it might have been common for the donor to be generous with their loved ones while they had capacity, it can no longer be appropriate once they are incapable
  • distributing assets from the donor's estate during their lifetime (ie paying gifts from the donor's Will before death) – an Attorney must not distribute the estate prior to death; this can only be done by the legal representative of the Estate after death (ie the Executor or Administrator who has obtained a Grant of Probate or Letters of Administration from the Supreme Court of Western Australia)
  • taking a commission from the sale of property belonging to the donor (except in circumstances where there is informed consent of a donor with legal capacity);
  • failing to pay for essential goods and services required by the donor, despite there being funds available or assets available to be sold
  • failing to exercise proper care in managing the donor's estate, resulting in losses that were avoidable

As a community, we are increasingly aware of the prevalence of elder abuse. Elder abuse includes financial abuse facilitated by the misuse of a valid power of attorney, or coercion of a vulnerable person to execute an Enduring Power of Attorney in order to take control of their assets. Sometimes, an Attorney might not even be consciously aware that their conduct constitutes abuse – it can be a gradual shift from acting in the best interests of the donor to acting in the interests of the donee or someone else.

Example: Parent A and Parent B have 3 children. When Parent B dies, Parent A needs additional support in order to remain living in the family home. Child C steps up to provide that support and moves into the family home. After some years of this arrangement, Child C tells Parent A that they can only continue to support them if they transfer the family home into their name, and Child C will build a granny flat for Parent A. Parent A feels that they have no option but to agree. The legal documents are completed by Child C using an EPA executed by Parent A. When Parent A deteriorates, the granny flat has still not been built. Parent A needs to go into aged care accommodation, but there are no assets in their name to pay for a placement in their preferred accommodation. Child C's decision to transfer the family home into their own name has breached their fiduciary duties to Parent A.

Some forms of elder abuse such as theft and fraud are also criminal offences in Western Australia. Police may be able to charge an Attorney with an offence in some circumstances.

I have evidence that an attorney is doing the wrong thing. Can I take action to stop their misuse of their powers? Can they be forced to pay back any misappropriated funds?

Yes. You should consult a lawyer with experience in estates law and litigation to understand what options you might have including the likely costs and risks of taking action.

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.

ARTICLE
10 April 2024

Enduring Power Of Attorney – responsibilities and risks

Australia Family and Matrimonial

Contributor

HHG Legal Group has been serving Western Australians for over 100 years. With a large team across five offices, we offer top-notch legal advice and representation, exceeding expectations for all clients.
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