It’s a good idea to make an enduring power of attorney. It will give the person you appoint very wide powers to make legal and financial (and in some States, personal) decisions on your behalf if you’re unable to make those decisions for yourself. However, you need to plan carefully about how you make this appointment. A standard appointment of an enduring attorney often falls short of providing your attorney with all the necessary authority they need to keep things moving as you would expect.
Do you want your enduring attorney to have the power to do any of the following things:
- Continue to live in your family home owned by you while you are incapacitated;
- Use your money to make mortgage payments on your home, when the loan is in someone else’s name (e.g. your spouse);
- Provide other kinds of financial support for your spouse, of which you may not gain any real benefit from;
- Provide financial support for your children, e.g. continue an allowance, assist them purchase a house;
- Transfer your home into the name of your enduring attorney to protect it from third-party claims, or to ensure your testamentary wishes are followed;
- Use some of your funds to upgrade your enduring attorney’s home (or another family member’s home) so that they can look after you;
- Use some of your money to upgrade the enduring attorney’s car so they can drive you to the doctor’s surgery;
- Cash in your share portfolio and re-invest the assets in your enduring attorney’s business, giving you a better return; or
- Transfer assets out of your name into your enduring attorney’s name, or the names of your children, to ensure you will be eligible for a more generous Centrelink pension and lower Aged Care costs.
Unless there is an actual term in your enduring power of attorney allowing your attorney to do these things, then they can’t do it.
This is because your enduring attorney enters into a fiduciary relationship with you (as the ‘Donor’).
Fiduciary relationships are rare. They arise when someone who is vulnerable needs to place reliance on another person, in circumstances where the vulnerable person needs to be protected. Examples, where this relationship has been found, include between a lawyer and client, directors and shareholders and trustees and beneficiaries.
In this case, the fiduciary relationship between you and your enduring attorney means your enduring attorney must put your interests ahead of their own. Your enduring attorney must not profit from their role as your enduring attorney, or gain a personal benefit, or provided a benefit to a third party – unless you have expressly consented for them to do this.
There are certainly well documented cases where people holding an enduring power of attorney have abused the privilege. However, in many cases, the fact that your enduring attorney breaches this very high ‘fiduciary’ standard is because insufficient thought has been given about how to set up the enduring power of attorney in the first place. You need to take into account how your own your assets, who are financially dependent upon you, and what it means if you appoint a family member.
What should you do?
Yes, you need to have in place an enduring power of attorney. But you need to make sure that the document you put in place gives your enduring attorney all the power they need to deal with your affairs as you intend. To balance this, you also need to consider who you appoint, so there are appropriate ‘check-and-balances’ in place.
For a no-obligation chat about getting this very important document right, please call us on 1300 654 590.
If you have been appointed as an enduring attorney, and you are unsure whether you have the power to do something, also feel free to call us for a chat on 1300 654 590.