A Power of Attorney is an integral component of any good succession plan. In its simplest terms, a Power of Attorney (POA) is a legal document, by which one person (the Appointor) authorises another person (the Attorney) to act in the place of the Appointor, most often by signing documents on the Appointor’s behalf.
In this situation, the Attorney has a legal obligation to act diligently and in the best interests of the Appointor, and to make decisions that help protect the Appointer against potentially being exploited or having their affairs mismanaged.
An Enduring Power of Attorney (EPOA) has the added distinctive feature of continuing to be effective even if the Appointor loses “legal capacity”. This feature has become increasingly important in an ageing society, as more and more of us live to very advanced ages, but are in many cases impaired by the ravages of dementia and the other age-related afflictions. Much younger people can also be stricken, whether through traumatic accident or illness. So, it makes good sense to protect against the evil day by appointing a trusted person to act as Attorney if the need ever arises.
What can an Attorney do?
A Power of Attorney confers enormous power on the Attorney – he or she can deal with the Appointor’s property and affairs as if it were the Attorney’s own (subject to any conditions or limitations outlined in the EPOA document).
An Attorney can:
- Complete legal transactions;
- Access the bank accounts of the Appointor to pay for expenses or to make repayments on loans taken out by the Appointor;
- Make financial decisions such as mortgaging or selling the Appointor’s property or other investments;
- Insure the assets of the Appointor that require insurance; and
- Maintain, preserve or improve the assets of the Appointor.
Crucially, whatever the Attorney does in the Appointor’s name under the Power of Attorney is binding on the Appointor. The Attorney must, of course, act solely in the Appointor’s interests, but once the deed is done, it very often cannot be undone.
Unless the Power of Attorney is otherwise restricted, the Attorney can act under the Power as soon as he or she accepts the appointment, even when the Appointor is fully in charge of their own affairs.
Therefore, the Attorney must be someone that the Appointor can absolutely trust. Very often the obvious and appropriate Attorney is the Appointor’s spouse. If, for whatever reason, that is inappropriate, or if a substitute Attorney is required in the event the spouse becomes unavailable (through death or their own disability) it is common to appoint other family members, such as adult children, brothers and sisters – and who better to trust?
However one of the biggest risks when making an enduring POA is that the Attorney could abuse their power. Sometimes a trusted family member suffers financial reverses which lead to desperation and temptation, misappropriating funds from the Appointor’s bank account or even, in extreme cases, mortgaging or selling the Appointor’s home.
It is also not uncommon to hear of people claiming that their elderly parent with dementia wanted them to have the family home, or that they were happy for them to take all their funds from their bank account as a “thank you” for taking care of them.
According to research conducted by Alzheimers Australia, a considerable proportion of financial abuse of people with dementia is perpetrated by people appointed as an Attorney under an Enduring Power of Attorney not acting in the interests of the person with dementia.
Conversely, the Attorney may genuinely consider they are acting in the Appointor’s best interests even when going against the Appointor’s wishes – perhaps by intervening to stop seemingly extravagant expenditure of savings meant to support the Appointor in old age (or, more cynically, to form the Attorney’s inheritance).
How to minimise the risk of Power of Attorney (POA) abuse
Whilst having an enduring POA is a necessary part of succession planning, it is important to take some steps in order to protect yourself from potential POA abuse:
- Except where the Attorney is the Appointor’s spouse, appoint 2 people as Attorneys, not just one, and appoint them jointly – so that they must both sign any documents. The chances of both of them going rogue are much less than one only.
- Express the Power of Attorney to be effective only after a medical doctor has certified that the Appointor is unable to manage his/her affairs. That way, at least as long as you are capable of making your own decisions, no one can stop you doing so – if you want to waste your money, you do it your own way!
- Only appoint somebody you trust (even if that person is not a family member) and don’t be pressured into signing documents without understanding the nature of what you are signing and obtaining independent legal advice.
- If you no longer feel comfortable with your appointed Attorney, talk to somebody you trust. You can revoke a Power of Attorney at any time provided you have legal capacity. The revocation should be in writing and you should ensure that your Attorney receives the document. Also provide copies to any financial institutions or other entities the attorney has dealt with on your behalf.
What to do if you believe a POA is being abused?
If you have a POA that enables the Attorney to act on your behalf while you still have mental capacity, it is essential to seek legal advice and guidance as to the best legal recourse, which may include:
- Revoking the Power of Attorney as quickly as possible;
- Filing official paperwork with the Registrar of Titles to stop any further transfers of the property (including putting your own caveat over your own land to discourage fraud);
- Withdrawing any bank signatory arrangements or other means by which the abuse is occurring; and
- Initiating court proceedings for remedies to reverse a transfer of the property as well as to obtain compensation for the transgressions.
However, if the Appointor is incapacitated the process is more complex. If you are concerned that a POA is being abused, you need to take action on behalf of the Appointor with the relevant Government body in your state (State and Administrative Tribunals, Public Guardian Offices and / or Courts) as they have powers to investigate, intervene or suspend a Power of Attorney, as well as make a range of orders with respect to these matters.
Granting a Power of Attorney is a significant legal decision that should be made with a combination of trust and caution. Whilst human nature means we often have absolute faith in those closest to us, it is vital to take a few precautionary measures to ensure that no matter what the future may bring, you will be well protected, at every stage of your life.
If you have any queries or would like further information please contact the team at Antcliffe Scott.