Enduring Powers of Attorney have been at the centre of much recent media scrutiny. There are two extremes often cited – one where a person is being chased by the crew of "A Current Affair" for using a Power of Attorney to rip money out of the account of another person, to the other extreme where the NSW State Government (unlawfully) imposed an insurance style arrangement via a Surety Bond scheme of up to $12,000 per annum on people managing the affairs of persons in order to insure the incapacitated person against the (financial) manager stealing the incapacitated person's funds.
Certainly, this is an area of increasing concern with an ageing population and medical advances meaning people may live with ongoing disability longer whereas, in previous years, such medical conditions would have meant certain death.
In both the (extreme) examples above, in many circumstances, the unpalatable outcome can be circumvented in a number of ways. For example, an Enduring Power of Attorney may be signed to avoid a financial manager being appointed, and appropriate checks and balances put in place. In the case of an Enduring Power of Attorney being appointed, it is recommended a person making the appointment consider the following:
- who you appoint. For example, is your proposed attorney vulnerable to be influenced by others? Or tempted to use your assets as their own? (This would be a clear breach of law but better to avoid than to cure). What are their skill sets? Are they trustworthy and responsible?
- Do you appoint more than one Attorney? If so, do you want them to act jointly, jointly and severally, or, if three or more, by majority?
- Do you provide financial assistance to anyone? If so, do you
want the Enduring Powers of Attorney to continue the provision of
such assistance? We recommend considering your wishes/directions
and stipulating same. It is not uncommon to see arguments such as:
- "Mum would want me to have $20,000 as a gift for my bathroom renovation"
- "But Dad always paid the grandkids' school fees – how will we manage now?"
- "Well, I've always paid less than market rent to Mum and Dad to live in their investment property. There is no formal Lease, it was just our arrangement. Why should it stop now just because they are going into a nursing home? Sell their main residence instead".
- Put limits or directions in the Enduring Power of Attorney. For example, stipulating certain assets cannot be sold, or the Enduring Power of Attorney only acts for certain assets or different decision makers make different decisions depending on the amount of assets being dealt with.
- When does the Power of Attorney come into effect? For example, is it with immediate effect, or only as proven by a medical report stating you have lost capacity, or some other event?
- Does the Enduring Power of Attorney reflect the Attorney's current situation? For example, if you have appointed your spouse and your spouse is very ill, it may be a burden for your spouse to then have to act as your Attorney. Or if you and your spouse are both going into a nursing home, it may not be practical to have each other, and you may then wish to appoint other people in the first instance.
- An Enduring Power of Attorney is a life document. You can revoke it during your lifetime whilst you have capacity. Indeed, it can only be lawfully used when you are alive so, in this regard, it is a very important document because you will be alive whilst it is being operated and you will live with the consequences of the decisions made. It may be things as banal as talking to your service provider about your phone bill, or dealing with Medicare on your behalf, or something as important as selling real property in your name, buying and selling shares, dealing with the Tax Office, or taking legal proceedings on your behalf.
- You may also wish to consider whether or not assets can be transferred to another person. For example, if you have a joint term deposit with, say, your spouse and the time comes for the term deposit to be reinvested, must it remain joint property or can your spouse transfer it into their sole name, (for example, there may be tax advantages)? Remember when considering such things, it is also important to consider your estate plan.
- Self-Managed Superannuation Fund members should also give very serious consideration to having an Enduring Power of Attorney in place in order to ensure compliance with the SIS act so that the Self-Managed Superannuation Fund can maintain its complying status if a member loses capacity.
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.