4 April 2018

Powers of Attorney and how not to lose the family home

A recent WA case is a reminder of the financial abuse that can and does take place against older people in our communities. In GYM [2017] WASAT 136 an elderly woman with dementia (and no Enduring Power of Attorney) was taken advantage of by her sons who (amongst other things):

  • sold her farm
  • transferred the family home into their names

The woman’s once substantial estate diminished to a fraction of its size and because she was not entitled to a Centrelink pension, she was left with limited ability to pay for her ongoing medical needs.

Seeking redress

The woman’s granddaughter initiated an application in the WA State Administrative Tribunal to have the Public Trustee of WA appointed as her grandmother’s financial manager. The Tribunal held that the sons ‘clearly exploited their mother whom they accepted lacked legal capacity’ and made Orders:

  • appointing the Public Trustee as the woman’s financial manager
  • ordering the Public Trustee to
    • lodge a caveat over the family home
    • take action to recover the money transferred from the woman to the sons
    • refer the matter of the sons’ misappropriation to the police for further investigation and prosecution

What are the boundaries?

Even if you have an Enduring Power of Attorney, what are the limits on the powers given to attorneys?

Generally, an attorney can only use the assets of the principal (the person who made the power of attorney) in the best interests of the principal.

However, legislation in most jurisdictions allows the principal to permit their attorney to use the principal’s estate to ‘confer benefits’ on other people.

For instance, it is usual for a principal to give this power to their spouse so that the spouse can use the principal’s assets to assist them meet their reasonable living and medical expenses. However, the use of the principal’s assets should not be more than what is reasonable having regard to all the circumstances and, in particular, the principal’s financial circumstances and the size of the principal’s estate.

The scope of the attorney’s ability to act can also be limited or increased by the power given to them under the document. This can often require careful drafting in specific situations.

The importance of Enduring Powers of Attorney

This case reiterates the importance of making an Enduring Power of Attorney in the event that mental capacity is lost and financial or legal affairs cannot be managed.

It is also important to review Enduring Powers of Attorney on a regular basis. If an attorney will no longer act in the best interests of a principal or is no longer the appropriate person, the Enduring Power of Attorney should be revoked and a replacement attorney appointed.

If an attorney breaches their fiduciary duties but the principal no longer has the legal capacity to revoke and make a new Enduring Power of Attorney, an interested person can also make an application to the Administrative Tribunal in their State or Territory for orders that the attorney is removed and replaced. This avenue is also available for a client who has never made an Enduring Power of Attorney, like the woman in this case. The removed attorney/person who intermeddled with the client’s financial affairs may also be subject to civil or criminal penalties or both where they have not acted in the best interests of the principal.

Contact

With over ten years' of experience, William helps clients to work through their succession planning goals and issues...

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Emma has extensive experience in advising clients in estate planning and estate administration, trust establishment, and ongoing administration, trust estate disputes and structuring for succession of ownership and control of private and family businesses...

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Kate has close to 10 years' experience specialising in succession law including wills, testamentary and discretionary trusts, protective trusts, powers of attorney, appointments of guardian advanced health directives and probate and letters of administration.

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