Pow­ers of At­tor­ney – a dou­ble-edged sword

Monthly Chronicle - - Business & Personal Finance - LEAH SEWELL, LAWYER

A per­son with POA owes fidu­ciary du­ties to you. These in­clude a duty to act hon­estly, a duty to keep their money sep­a­rate from yours, and to en­sure there’s no con­flict of in­ter­est.

How­ever, in­creas­ingly there are cases com­ing through the Supreme Court in re­cent times where these trusted per­sons have acted in their own in­ter­est and abused their Power of At­tor­ney, with the ef­fect of sell­ing or giv­ing away the as­sets of the per­son so their es­tate is sig­nif­i­cantly eroded.

In one case the per­son with the POA was the sec­ond wife. When her hus­band lost ca­pac­ity and moved into aged care, she acted to sell the prop­erty (which was only in her name), used the pro­ceeds of sale to go on lav­ish hol­i­days and gave her chil­dren (who were not the chil­dren of the in­ca­pac­i­tated per­son) the money to pur­chase a prop­erty out­right. She also paid for the con­struc­tion of a granny flat on her daugh­ter’s prop­erty - all this when her only source of in­come was the aged pen­sion.

Af­ter the prin­ci­pal passed away his chil­dren were con­cerned that his as­sets had dis­ap­peared. They com­menced pro­ceed­ings and were ul­ti­mately suc­cess­ful. The Court found that the wife had acted in breach of her fidu­ciary du­ties, and she was no longer able to re­ceive any ben­e­fit un­der the will.

An­other re­cent case was where the hus­band had made a will leav­ing a farming prop­erty to his son. Af­ter he lost ca­pac­ity his wife used the POA to trans­fer the prop­erty to the daugh­ters, thus re­mov­ing the as­set from the hus­band’s es­tate and prevent­ing the gift go­ing to the son. This case is cur­rently un­der ap­peal.

It’s im­por­tant to know the breadth of the Pow­ers of an At­tor­ney and the im­pli­ca­tions of the dif­fer­ent op­tions you have when mak­ing a POA. A per­son hold­ing POA is not per­mit­ted to re­ceive a ben­e­fit from any de­ci­sion they may make. How­ever in NSW you may grant ex­press per­mis­sion for your POA holder to re­ceive a ben­e­fit or to con­fer ben­e­fits on a named third party. These ben­e­fits are lim­ited un­der the legislation to rea­son­able liv­ing and med­i­cal ex­penses of either the at­tor­ney or the third per­son, but these are very broadly de­fined.

You may also elect to grant a gift­ing power to the POA holder which en­ables them to give gifts to oth­ers. Gen­er­ally speak­ing these should be lim­ited to the type of gifts you are used to giv­ing when you have ca­pac­ity and to the peo­ple you would nor­mally give gifts to, how­ever these can be broadly in­ter­preted. These ad­di­tional pow­ers should not be given lightly.

A POA is a pow­er­ful tool and you need to un­der­stand the con­se­quences to safe­guard against the power be­ing used against you or to dis­in­herit your fam­ily. One way of safe­guard­ing against abuse is to in­clude more than one POA holder and re­quir­ing them to act jointly.

How­ever this should only be done if you be­lieve that the two peo­ple can work to­gether and will not be pre­vented by dis­tance, fam­ily re­la­tion­ships or dishar­mony.

As one of the rec­om­men­da­tions aris­ing from the Law Re­form Com­mis­sion Re­port into Elder Abuse, the Fed­eral Gov­ern­ment has com­mit­ted funds to es­tab­lish­ing a na­tional reg­is­ter of POA in the lat­est Fed­eral Bud­get.

Leah Sewell is a lawyer with 17 years’ ex­pe­ri­ence in prac­tice in Cher­ry­brook and Pen­nant Hills be­fore open­ing a new prac­tice in Beecroft three months ago. Her ar­eas of ex­per­tise are in es­tate plan­ning, es­tate man­age­ment and dis­putes, elder law and prop­erty in­clud­ing con­veyanc­ing. Tel: 9484 1165

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