What happens if you do not have the requisite capacity to manage your own legal and financial affairs and to make your own financial decisions? A simple way around this is to have a valid Enduring Power of Attorney (POA) in place. A POA is a legal document that allows a person (the principal) to appoint another person (the attorney) to have the authority to lawfully deal with their money, bank accounts and property. A POA is also useful in instances where you may be travelling overseas and unable to attend to payment of bills or manage your finances, as you can appoint someone to attend to this in your absence.
Duties of an attorney
Attorneys' are bound by various obligations and duties which include:
- obeying the principal's instructions
- making decisions and acting in the best interest of the principal
- keeping your money separate from that of the principal's money
- ensuring that adequate records and receipts are kept when making transactions
- not giving unauthorised gifts or donations to others
- not benefiting from your position as attorney
- avoiding any transactions that may create a conflict of interest between yourself and the principal.
What if my attorney isn't doing the right thing?
Unfortunately there continues to be an increase in the misuse and financial exploitation of POA documents particularly where POA documents are being used on behalf of elderly members of the community. Some of the red flags can include significant bank withdrawals or unusual activity on an account, including closure of an account, disposal of property, failure to pay bills or expenses on behalf of the principal as well as changes to the principals Will.
A POA continues until the principal dies, the principal revokes the appointment or the attorney is unwilling or unable to act on your behalf. If you are seeking to revoke an appointment, this can only be done by completing a formal revocation notice and serving this on the person previously appointed.
Section 47 of the Powers of Attorney Act (NSW) 2003 provides that if a power of attorney is terminated or suspended, an attorney who does an act that would have been within the scope of the power without knowing of the termination or suspension is entitled to rely on the power of attorney in relation to that act in the same manner and to the same extent as if the power had not been terminated or suspended. This means that your attorney can lawfully act in accordance with the power of attorney documents until they have been given notice that they have been revoked.
If the principal does not have the requisite capacity to revoke an appointment under a POA or you are concerned that an attorney is not acting in the best interests of the principal, then the matter can be referred to the guardianship division of the New South Wales Civil and Administrative Tribunal (NCAT). NCAT has the power to review POA documents and if necessary, can make orders to vary or revoke them or otherwise remove an attorney from office.
An application must contain sufficient evidence in support of the application including two reports by a medical practitioner, solicitor or an aged care provider, as well as any evidence of misuse of financial exploitation, such as bank statements demonstrating withdrawals or unusual transactions. Once you submit an application with NCAT the formal legal process begins which is controlled by NCAT and the matter is the allocated for hearing where a decision will be made. Generally it is not necessary for legal representation at the hearing however a request can be submitted should you wish to have a lawyer present.
How to minimise the risk of misuse of Power of Attorney documents
It is of vital importance that you consider the appointment of an attorney in great detail. The principal grants the attorney a great deal of power and authority of their financial affairs so it is critical that the person appointed is someone who is truthful, trustworthy and lives in close proximity to you, so as to ensure they can assist you with your needs when required.
It is also recommended to appoint more than one attorney to ensure there are checks and balances in place, as a joint appointment will provide that both attorneys need to act together and agree on decisions regarding the principal's affairs. In addition, the appointment of a substitute attorney is also a good idea, should the people first appointed no longer be suitable for the job or otherwise unable to act on your behalf.
A properly drafted POA document is important to every individual's estate plan regardless of your age. It is a form of insurance, if done properly, that can provide you with protection over your greatest assets and provide you with peace of mind that your financial affairs will be looked after should you not be able to do the job anymore. It is important to ensure that you have valid a POA document in place, and to regularly review your POA document to determine whether your nominated attorney remains suitable to your circumstances.
You should store your POA document in a safe place and provide your nominated attorney(s) with a copy. Your attorney will require a certified copy of your POA document in order to use it. Retaining your documents in our safe custody is a service that Kells provides free of charge and we will hold your documents for as long as you need. Please contact our office to speak to our estate planning team for further information.
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.