Enduring Power Of Attorney – responsibilities and risks – Wills/ Intestacy/ Estate Planning

Responsibilities and risks – acting under an Enduring
Power of Attorney

As individuals, we make many decisions each day. Decisions about
how we spend our money and how we manage what we have, simple
decisions and more complex ones. We make these decisions having
regard to our own unique needs and resources. We make decisions in
accordance with our personal set of values.

There may come a time when we need to rely on others to help us
to make reasonable decisions about our affairs. This time might
come because of illness or disability. It might happen very
quickly, or without warning.

An individual can, while they remain mentally competent, choose
to make a legal document that appoints another or others who they
wish to make financial and legal decisions on their behalf.

A Power of Attorney is a legal document where an individual (a
“donor“) gives another (their
“Attorney“) the power to exercise
certain legal powers. This document can only be used while the
donor continues to have legal capacity.

An Enduring Power of Attorney (sometimes
shortened to “EPA” or “EPoA”),
goes further – it is a legal document whereby an Attorney is
appointed as substitute decision maker by the donor of the EPA to
take over all decisions about financial and legal matters for the
donor, even after that donor has lost capacity.

In Western Australia, there are formal requirements for an EPA
to be valid. The law governing EPAs in WA is the Guardianship
and Administration Act 1990 (WA) (“the
Act“). The specific terms of the EPA are
important.

You can find out more about making an Enduring Power of Attorney
here:

FIND OUT MORE

What are the legal obligations of an Attorney in Western
Australia?

An EPA will only be effective where the appointment has been
validly accepted by the Attorney. A person who has been asked to
accept appointment under an EPA should give thought to whether it
is something they are willing to do, as the appointment comes with
considerable obligations. Also, a proposed Attorney should not
accept an appointment as an Attorney unless they believe that the
person making the EPA has legal capacity. If unsure, they might ask
the person proposing to make the EPA to have their doctor assess
and confirm that they have the capacity to make an EPA.

An Attorney’s legal obligations are set out in the Act (at
section 107). You can obtain a copy of the current version of the
Act from the government website:

VISIT WEBSITE

The Attorney:

• must exercise their powers as Attorney with reasonable
  diligence to protect the interests of the donor and, if they fail
  to do so, they are liable to the donor for any loss occasioned by
  the failure;




• must keep accounts. These accounts do not need to be routinely
  passed (contrasted with a Private Administrator who must have their
  accounts passed by the Public Trustee annually), but need to be an
  accurate record and account of all dealings and transactions made
  under the EPA;




• must not renounce their power under the EPA during any period
  of legal incapacity of the donor, except subject to section 109(2)
  of the Act which says that the State Administrative Tribunal
  (“SAT“) can revoke or vary an EPA in
  certain circumstances; and




• must advise SAT if they become bankrupt.

Examples of the duties and responsibilities of an Attorney
include (subject to any limits contained in the EPA):

• Managing assets including real estate




• Recovering debts




• Managing liabilities such as a home loan or personal debt




• Collecting income including any pensions or rent




• Maintaining and insuring real property




• Purchasing or selling real property




• Financing a move into aged care accommodation




• Preparing and lodging tax returns




• Carrying on a business




• Managing inheritances or payments of death benefits payable to
  the person (ie from the estate of someone else)




• Liaising with government bodies such as Centrelink on the
  person’s behalf

An EPA does not give another the right to make decisions about
personal matters such as medical treatment accommodation. These
decisions can be made under a different legal document called an
Enduring Power of Guardianship, or under a guardianship order made
by SAT.

Trust and breaches of trust

What does it mean to say that an Attorney must exercise their
powers to protect the interests of the donor?

The relationship between the donor of an Enduring Power of
Attorney and the donee of that EPA is one where there is an
expectation of trust – that the appointed person (the
Attorney, not to be confused with the US term for a lawyer) will
always act in the best interests of the donor and cannot profit
from their appointment. This expectation is confirmed by the
provisions of the Act.

Sometimes an Attorney acts inappropriately and breaches the
relationship of trust. A breach might be accidental or
deliberate.

Breaching trust can cause harm or distress to the donor and can
deplete their estate during their lifetime. In some circumstances,
misuse of an enduring power of attorney occurs within the context
of elder abuse. Where there is a breach of trust, legal action
against an Attorney is possible – to remove the
Attorney’s authority or to remedy damage caused or both.

What is the role of the State Administrative Tribunal in
relation to Powers of Attorney?

SAT has the power to vary or revoke an EPA. Under the Act, SAT
has other powers in relation to EPAs including to make a
declaration that an EPA is valid and “in force” because
the person who made the EPA does not have legal capacity. SAT can
also require an Attorney to produce records about their use of an
EPA.

SAT must make decisions in the best interests of any represented
person, or of a person in respect of whom an application is
made.

Under the Act, every person shall be presumed to be capable
of:

1. looking after his own health and safety;




2. making reasonable judgments in respect of matters relating to
   his person;




3. managing his own affairs; and




4. making reasonable judgments in respect of matters relating to
   his estate,

until the contrary is proved to the satisfaction of the State
Administrative Tribunal.

SAT can appoint a Guardian or Administrator for a person who can
no longer make decisions for themself. SAT will not make a
guardianship or administration order if the needs of the person in
respect of whom an application for such an order is made could, in
the opinion of SAT, be met by other means less restrictive of the
person’s freedom of decision and action. If a person has made
an EPA validly before they lost legal capacity, SAT will not revoke
that EPA unless it is in the best interests of the donor to do
so.

SAT has the power to supervise the conduct of Attorneys to
ensure that they fulfill their obligations to act diligently and
protect the donor’s interests. SAT will only scrutinise
transactions undertaken pursuant to an EPA if there is something
that requires an inquiry, or there is a sufficient basis for making
an order for an audit of the accounts and records – it will
not act on “mere suspicion”. The orders SAT can make
under the Act can only compel a party to produce documents and
records that already exist, and if there is a sufficient basis, SAT
can order that an audit of the information contained in those
documents occur.

SAT is set up to be a user-friendly jurisdiction. However,
parties can choose to be represented by a lawyer. Having a lawyer
present might be appropriate where there are complex facts or where
a party finds it difficult to follow the proceedings and understand
the law. Costs orders are not usually made in matters brought to
SAT under the Act.

When is use of a Power of Attorney unlawful?

An Attorney has a duty to the donor which is
“fiduciary” in nature – the Attorney must not act
in their own interests and must avoid conflict with the donor’s
interests, and the Attorney must not use their position to advance
their own interests or profit from a transaction.

If wrongdoing by an Attorney can be established, such as a
breach of the Attorney’s fiduciary duty to the donor, then
remedies can be pursued in the Courts – which one will depend
on the nature and value of the specific claim against the
Attorney.

Some examples of abuse of power include:

• making gifts from the donor to family or friends – while
  it might have been common for the donor to be generous with their
  loved ones while they had capacity, it can no longer be appropriate
  once they are incapable




• distributing assets from the donor’s estate during their
  lifetime (ie paying gifts from the donor’s Will before death)
  – an Attorney must not distribute the estate prior to death;
  this can only be done by the legal representative of the Estate
  after death (ie the Executor or Administrator who has obtained a
  Grant of Probate or Letters of Administration from the Supreme
  Court of Western Australia)




• taking a commission from the sale of property belonging to the
  donor (except in circumstances where there is informed consent of a
  donor with legal capacity);




• failing to pay for essential goods and services required by the
  donor, despite there being funds available or assets available to
  be sold




• failing to exercise proper care in managing the donor’s
  estate, resulting in losses that were avoidable

As a community, we are increasingly aware of the prevalence of
elder abuse. Elder abuse includes financial abuse facilitated by
the misuse of a valid power of attorney, or coercion of a
vulnerable person to execute an Enduring Power of Attorney in order
to take control of their assets. Sometimes, an Attorney might not
even be consciously aware that their conduct constitutes abuse
– it can be a gradual shift from acting in the best interests
of the donor to acting in the interests of the donee or someone
else.

Example: Parent A and Parent B have 3 children.
When Parent B dies, Parent A needs additional support in order to
remain living in the family home. Child C steps up to provide that
support and moves into the family home. After some years of this
arrangement, Child C tells Parent A that they can only continue to
support them if they transfer the family home into their name, and
Child C will build a granny flat for Parent A. Parent A feels that
they have no option but to agree. The legal documents are completed
by Child C using an EPA executed by Parent A. When Parent A
deteriorates, the granny flat has still not been built. Parent A
needs to go into aged care accommodation, but there are no assets
in their name to pay for a placement in their preferred
accommodation. Child C’s decision to transfer the family home
into their own name has breached their fiduciary duties to Parent
A.

Some forms of elder abuse such as theft and fraud are also
criminal offences in Western Australia. Police may be able to
charge an Attorney with an offence in some circumstances.

I have evidence that an attorney is doing the wrong thing. Can
I take action to stop their misuse of their powers? Can they be
forced to pay back any misappropriated funds?

Yes. You should consult a lawyer with experience in estates law
and litigation to understand what options you might have including
the likely costs and risks of taking action.

How can HHG Legal Group help?

If you need advice unique to you, an appointment with one of our
wills and estates or litigation lawyers might be suitable.
Similarly, if you have been appointed as an Attorney and need
guidance on exercising your powers, we can assist. Finally, we can
advise persons who are considering taking action against a
delinquent Attorney

Remember, it’s important to seek professional legal advice
when dealing with matters of an EPA to ensure all actions are
compliant with the law.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.