An enduring power of attorney is a legal document wherein a person (Principal) appoints another person (Attorney) to make decisions and act on their behalf in respect of certain matters.
An Attorney can be appointed to make decisions on behalf of a Principal regarding personal and / or financial matters.
What are personal matters?
Personal matters relate to the Principal’s lifestyle and include decisions regarding the Principal’s:
- accommodation, including where and with whom they live;
- healthcare and medical treatment;
- work arrangements;
- access to people and services;
- holidays, including whether they will go on a holiday and where.
What are financial matters?
Financial matters relate to the Principal’s day to day and long-term finances, and include the ability to do the following on behalf of the Principal:
- sign legal documents;
- purchase items and pay for expenses;
- access and manage bank accounts;
- invest money;
- receive money;
- recover loans and debts;
- purchase / sell property;
- manage their business.
What are some things an Attorney cannot do?
While an enduring power of attorney provides significant scope for an Attorney to act on behalf of a Principal, there are certain acts an Attorney cannot do. In particular, an Attorney cannot:
- make or revoke a will of the Principal;
- make or revoke an enduring power of attorney;
- vote on behalf of the Principal in state, federal or local elections;
- consent to a marriage / dissolution of a marriage;
- make decisions regarding a child of the Principal who is under 18;
- manage the estate of the Principal upon their death (unless they are appointed as executor under the Principal’s will);
- consent to an unlawful act.
Why make an enduring power of attorney?
Sometimes, a Principal will not be able to make decisions or undertake certain tasks because they are out of the jurisdiction (eg overseas) and not contactable. In other cases, a Principal may have lost the ability to make decisions or is likely to lose capacity to make decisions in the future. In these circumstances, an enduring power of attorney allows an Attorney to make decisions on behalf of the Principal to protect their best interests.
If a family member or loved one does not have an enduring power of attorney and subsequently loses capacity, an application to the Victorian Civil & Administrative Tribunal (VCAT) must be made to have an administrator or guardian appointed. Please see our section regarding guardians and administrators, which can be found at (insert link).
Appointing a guardian and / or administrator can be a time-consuming and costly process, especially if the application is contested. Furthermore, sometimes decisions on behalf of a loved one or family need to be made urgently – which is why having an enduring power of attorney in place is important.
What is contained in an enduring power of attorney?
An enduring power of attorney will need to contain the following information:
- the name and contact details of the Principal;
- the name and contact details of the Attorney;
- if more than one Attorney is appointed, then whether the Attorneys are to act jointly, severally, jointly and severally or by majority;
- any conditions or instructions about the decisions the Attorney(s) can make;
- when the decision-making power of the Attorney(s) will commence. For instance, an enduring power of attorney can commence:
(b) upon the Principal ceasing to have capacity (the ability to make decisions);
(c) on a specific event or occasion as specified in the document.
When does an enduring power of attorney come to an end?
An enduring power of attorney will cease being effective when the following occurs:
- if there is only one Attorney:
- the Attorney dies, loses capacity or becomes insolvent or under administration;
- if the Attorney is found guilty of an offence of dishonesty and they are appointed for financial matters;
- if the Attorney becomes a care worker, healthcare provider or an accommodation provider for the Principal,
- in all other circumstances:
- if the Principal dies;
- if the Principal revokes the enduring power of attorney or makes a later enduring power of attorney.
What are the duties of an Attorney?
An Attorney is bound by strict obligations and duties, which include the duty to:
- act honestly, diligently and in good faith;
- use reasonable skill and care;
- not profit from the position of Attorney;
- avoid acting when there is a conflict of interest between the Principal’s interests and the Attorney’s interests;
- keep information regarding the Principal confidential and refrain from disclosing it unless required to by law;
- keep accurate books, records and accounts of all financial transactions made on behalf of the Principal.
What are some common mistakes made by Attorneys?
Being appointed as an Attorney is an incredibly important and onerous role, and imparts very strict obligations on the Attorney to act in the best interests of the Principal.
Some examples of serious mistakes commonly made by Attorneys include:
- transferring real property from the Principal into their own name. This is a serious conflict of interest because the transaction is clearly not in the best interests of the Principal. This transaction would be considered a conflict transaction even if the Principal had agreed to the transfer and signed the necessary documentation. The fact that the Attorney has received property from the Principal while an enduring power of attorney is in place gives rise to a presumption that the transfer was a conflict transaction;
- living in the Principal’s property rent free, if the Principal does not have capacity to agree to the arrangement. This example is a conflict transaction because the Attorney is preferring their own interests over the Principal’s interests, because the Principal would otherwise receive rent for their property;
- purchasing groceries for the Principal using their funds but failing to keep a receipt of the items purchased. If an Attorney is purchasing items for a Principal, they must always keep records of the funds expended;
- combining their own personal bank accounts with the Principal’s bank accounts. It is very important that the assets and property of the Principal are not intermingled with the Attorney’s own assets. If an Attorney’s assets are mixed with the assets of the Principal, there is a real possibility that the Attorney may use the Principal’s assets for their own benefit, inadvertently or otherwise.
What can I do if I need advice about a decision as an Attorney?
An Attorney can apply to VCAT for advice regarding the scope of their administration order or the exercise of any powers as administrator.
For example, an Attorney can apply to VCAT for advice as to whether:
- they can sell the Principal’s property / purchase a new one;
- it is appropriate for the Attorney to enter into a conflict transaction on behalf of the Principal;
- existing financial arrangements with family members should continue / cease.
Before obtaining advice from VCAT, it may be prudent for an Attorney to obtain professional advice from a financial adviser. The costs to obtain such advice can be paid from the Principal’s assets, provided accurate records of the costs are kept.
What can I do if an Attorney has caused loss to a Principal?
If a Principal has suffered a loss as a result of an Attorney’s conduct, then it is possible to apply to VCAT or the Supreme Court of Victoria for compensation.
As an example, if an Attorney has transferred a property belonging to the Principal into their own name, then it is possible to file a claim for compensation to have the transfer reversed.
A claim for compensation can be made by the following people:
- the Principal;
- a later Attorney for the Principal;
- the personal representative of a Principal’s estate;
- the nearest relative of the Attorney;
- any other person determined by the Supreme Court or VCAT as having a special interest in the affairs of the Attorney.
The law regarding enduring powers of attorney and VCAT is very complicated. Furthermore, the appointment of an Attorney is a very important decision that should not be made lightly.
Similarly, being appointed as an Attorney is a very serious role that carries significant responsibilities.
If you require advice regarding enduring powers of attorney or VCAT matters, please contact our Wills & Estates team.