Enduring Powers of Attorney – How to get it right and avoid the pitfalls

We recently advised an elderly client whose appointed Attorney had begun using their powers made under their Power of Attorney without proper consultation. 

This is because, some years ago, the Power of Attorney gave immediate power to the Attorney appointed to act on her behalf in relation to her financial affairs, despite the fact that she was still mentally capable and wished to be kept informed.

What is an Enduring Power of Attorney?

An Enduring Power of Attorney is entered into by an Appointer (the person giving the Power of Attorney) who gives (appoints) another person (Attorney) to act on their behalf, for the remainder of their life, or a shorter period of time.

It is a common mistake for Appointors to give their “Attorney” the power to act without a medical practitioner having issued a certificate saying that the they are unable to manage their affairs.

The most common problem

We have seen too many cases where the Attorneyship has been written so that it becomes operative before the provision of medical certification regarding incapacity, i.e. means it becomes operative immediately. Some Attorneys begin ‘stretching’ their powers without proper consultation with the Appointer and neglect their statutory duties to have the Appointer as involved as possible in their decisions.

We hear many complaints of Attorneys “telling” a physically-incapacitated, as opposed to mentally-incapacitated Appointer, that they will make decisions for health care and sale of the Appointer’s property. This creates immense stress for the Appointer in circumstances where the Attorney could be viewed as acting in their own interests and outside the powers they legally have.

How to prevent it

Careful thought needs to be given as to the terms of your Power of Attorney. These terms deal with the Attorney’s right to make decisions for you in relation to financial matters (NSW) and financial and personal/health matters (Qld).

Ask yourself

When is your Attorney able to exercise the Attorneyship? Immediately? Or once a medical practitioner certifies in writing that you can no longer manage your affairs (due to mental illness and the like) or on the happening of some other circumstance or event?

Wilson Haynes Advice

In the end we made an out call to our client in hospital and took instructions to re-draft her Power of Attorney. We advised her that irrespective of whether the Attorneyship is given to a family member or not, care should be taken to ensure it does not become operative until a medical practitioner certifies in writing that an Appointer can no longer manage their affairs.

Superannuation Funds

Finally, in respect of Superannuation Funds, we advise clients they should restrict their Attorney’s powers to alter their Binding Death Benefit Nominations (BDBNs).

BDBNs specify the beneficiaries of the Appointers superannuation fund at death. It is easy to see how some Attorneys may alter the BDBN to include themselves or other parties. Protection for Appointors and their beneficiaries can be achieved by a provision in he Enduring Power of Attorney stating that the Attorney may alter the beneficiaries under a BDBN ONLY by nominating the Legal Personal Representative (Executor) of the Appointor’s will as the beneficiary. This means the beneficiaries of the Appointor’s estate will become the beneficiaries of the Appointor’s superannuation. 

This can be achieved by a simple provision permitting the Attorney to alter them only to the extent of appointing the Legal Personal Representative (Executor) of the Appointer’s Will as the beneficiary of the proceeds of the Super Fund.

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