Enduring power of attorney
There’s an old adage about how parents should be nice to their kids because they’ll be the ones choosing what to do with Mum or Dad when they’re in their dotage.
And as New Zealand’s population ages and more of us are living longer, it’s become something of a truism. Leaving the management of our financial and health affairs to chance is, according to most lawyers, asking for trouble.
Dementia and Alzheimer’s may develop over a period of time, but other unforeseen health issues such as a stroke or a serious accident or other illness can incapacitate a person in an instant.
It’s why appointing an enduring power of attorney (EPA) – which lets someone you designate make decisions for you when you can no longer do so – at the time you make a will is a sensible idea, even if the thought of having someone else taking over your bank account horrifies you at the time.
Many people mistakenly think that if a loved one loses mental capacity, their next of kin automatically has the authority to take over their affairs. Not so – without an EPA, you need to apply to court to get the necessary permissions.
There are two types of EPA – personal care and welfare, and property. A personal care and welfare attorney is concerned with issues such as where you live and whether you are being properly cared for. An EPA for personal care and welfare only comes into effect if you (the donor) become mentally incapable, as certified by a doctor. A property EPA lets you appoint someone to manage financial and property decisions for you, including managing your bank account, paying bills and buying or selling assets, and can come into effect at any stage.
Of course, just because you have an EPA doesn’t mean things can’t go awry. They can, and do, though disputes and abuse of the powers are exceptions rather than the rule.
Hanny Naus, an advisor at Age Concern, hasn’t come across anyone quite as brazen as the 26-year-old Scottish woman who last month was reported as spending her grandmother’s $38,700 life savings on, among other things, a hot tub, a sex toy, jewellery and a drone, but she has seen some extremely upsetting examples of abuse of attorney.
“Most of the cases we see are where the person who has enduring power of attorney acts in their own interests. They might want the person to go into a rest home because the
assets are in a trust and can’t be touched, and their inheritance is safe, or they will keep them in their home because if they go into care, then some of the inheritance will be lost because it will be required to pay for that care.”
She says people with financial EPA often don’t see the needs of the donor as priorities. “I have seen cases where the son who is ‘good at business’ has been made financial EPA, and the so-called wonderful son with great business acumen is just furious at having to spend money on their parent. They forget it is the parent’s money to use for things they need while they are alive.
“Another example is
Mum might need hearing aids because it’s very hard having a conversation with her, but the person who holds financial EPA might think that’s a waste of $3000 because she’s old. They may be small things but they are often the ones that cause the most problems.”
Age Concern has also seen more people wanting their inheritance early, usually to pay for a deposit on a first home.
“There’s a huge cultural expectation in this country that you will leave something for your children and that children will receive.
“In the face of increasing housing costs particularly, there’s often a lot of pressure on older people to release funds – to sell their house or take out a mortgage – to pay for a deposit on a home for the child. That is quite pervasive.”
Older people are often isolated, and many feel embarrassed and ashamed at the actions of their children, or people they had put their trust in, Hanny says.
Banks are far more proactive than they used to be and will generally act if they see any unusual activity or anything untoward.
She adds, “It could be that a person who used to come in regularly on their own is now coming in with another person who seems to be doing all the organising, or big amounts are being withdrawn, or there’s suddenly a new car for someone who no longer drives.”
While EPAs can offer substantial benefits – and most of them work well – anyone thinking about assigning an EPA should ensure they know exactly what they need to do for their own protection.
“And they should take advice from more than one source so they are not making spur of the moment decisions,” says Hanny.