Appointing an enduring power of attorney (EPOA) is becoming a more important and significant step for a person as the median age of Australia’s population rises and people live longer.
This demographic phenomenon means that about one in 10 Australians over the age of 65 will experience dementia and potentially lose the capacity to make important decisions about their lifestyle, their finances and their health.
An EPOA is a legal document created by a person that empowers another person or persons to make these decisions for them during their lifetime. The power can relate to both personal/health and financial decisions.
Where the power as expressed in the document is relevant to personal and health matters, it can only be exercised once the principal loses capacity to make those decisions during their lifetime.
Personal and health decisions can be where a person lives (home, retirement home, aged care facility, etc) and who they live with, plus the medical treatment he or she should receive, including procedures and medicines.
More commonly, an EPOA relates to the principal’s financial matters, such as accessing bank accounts to pay bills or repay loans, preparing tax returns, managing investments, shares and debts, and other matters. The power is enlivened when a person loses capacity to make such decisions, but the attorney document can also stipulate that the power begins from a specific date or in particular circumstances before the principal has lost capacity.
This post offers some tips for creating an EPOA, as well as some traps to avoid.
Tips in creating an EPOA
An EPOA is a fiduciary relationship between the principal and the person appointed as attorney, meaning the best interests of the former must always be protected by the latter.
For this reason, the attorney must be a responsible person over 18 years of age who fully understands the authority invested in them by the document. This includes understanding that responsibility is also owed to those people who rely on the principal during his or her lifetime, as well as his or her beneficiaries after death.
The person appointed under the EPOA must, therefore, be informed and aware of their duties and responsibilities as set out in the document before taking on the appointment.
The appointed attorney should be responsible with money and competent to make financial decisions. The attorney should be someone who seeks and prudently considers professional advice when required, and has the knowledge to act in accordance with legal requirements.
Where an EPOA is activated once a person loses mental capacity, it’s a good idea for the attorney to seek a letter from the principal’s doctor or a treating specialist that provides confirmation of the loss of capacity. This will help to prevent any potential dispute over the attorney acting outside of authority. In some cases, a person dealing with the attorney may also ask for this evidence of impaired capacity under section 33(5) of Queensland’s Powers of Attorney Act 1998.
Empowered to make financial decisions, an attorney may make a decision to sell an asset belonging to the principal. Before doing so, the attorney should take steps to ensure the asset is not listed as a specific gift in the principal’s will. This may avoid legal proceedings taken by a disappointed beneficiary who may fail to receive their intended gift under the attorney’s due to an asset being sold.
In Queensland, if the asset transaction involves land, the EPOA must be registered in the Queensland Titles Registry.
A final tip is that once the EPOA is made, the principal should inform trusted persons – such as his or her lawyer, financial adviser, super trustee or doctor, for example – of the existence of the document and provide those persons with a certified copy.
Are there traps to be wary of in making an EPOA?
For an attorney, a key thing to be aware of is the weight of the responsibility involved in the role. The powers invested can easily be misused, particularly with regard to managing the principal’s financial affairs.
They are also unable to resign from the appointment once the principal’s capacity is impaired, other than when authorised by the Queensland Civil and Administrative Tribunal (QCAT) or the Supreme Court.
Perhaps most significantly, if an attorney mismanages a principal’s affairs, either intentionally or through negligence, proceedings can be brought against them in a court or a complaint filed at the QCAT to recover money. The attorney may also be exposed to criminal charges.
Often a principal will appoint a close family member as an attorney. It’s not uncommon, for example, for family members to justify using the principal’s assets on the basis of, ‘Dad wanted us to have the money,’, or ‘Mum doesn’t needed the money but we do’. Again, the fiduciary nature of the EPOA relationship requires that the attorney always acts in the best interests of the principal. As a general rule, conflict of interest transactions by an attorney should be avoided by the attorney. An exception to this is where the conflict transaction is specifically authorised in the Power of Attorney document itself.
When an attorney is placed in a difficult position, such as pressure from other family members to ignore or loosely interpret the wishes of the principal, the attorney may apply to the court or QCAT for advice or direction ‘on any matter relating to the scope of the attorney’s appointment or the exercise of any function by the attorney’.
A principal’s superannuation poses a number of traps for an EPOA. If the principal has a self-managed super fund, an EPOA that addresses how the monies in the fund should be handled once the principal loses capacity is highly desirable. This is especially so if the attorney is also an intended beneficiary of any funds payable by the super fund following the principal’s death. Expert legal advice should be sought on this issue.
If the principal holds super with a trustee, the EPOA should detail what the attorney is authorised to do in terms of the principal’s binding death nomination, which instructs the trustee who to pay in the event of the principal’s death. In Re Narumon Pty Ltd (2018), the court found a duly authorised attorney could complete and sign a death benefit nomination provided they first abided by the terms of the superannuation trust deed, then the terms of the jurisdiction’s power of attorney laws, and then the federal superannuation legislation and regulations.
The EPOA should, therefore, clearly detail the attorney’s authority in regards to making a new binding death nomination, or varying or extending the terms of an existing nomination.
The importance of good legal advice
The points made above address only some of the issues involved in the creation of an EPOA. For more comprehensive advice and guidance – whether you’re seeking to appoint a trusted person as an attorney or you’ve been asked to be someone’s attorney – speak with trusted Brisbane firm Delaney & Delaney.
We have a century’s experience advising clients on this topic, including the making of a power of attorney document. We will discuss your needs and the best course of action in an initial consultation that helps clarify your mind about this important step.