With Great Power Comes Great Responsibility – Know Your Obligations Under A Power Of Attorney
Do you suspect an abuse of a power of attorney for a loved one? Ramsden Lawyers’ Litigation and Dispute Resolution’s Senior Associate, Lachlan Boyle, and Law Clerk, Riley Hickey, shed light on the obligations and responsibilities of individuals appointed to act as an attorney.
When an individual (the principal) cannot act on their behalf, they may choose to appoint a decision-making representative (the attorney) by executing a power of attorney. The Powers of Attorney Act 1998 (Qld) (Act) prescribes the forms of creating powers of attorney, namely, a general power of attorney (GPOA), or an enduring power of attorney (EPOA).
General power of attorney
A GPOA allows a principal to appoint an attorney to make decisions solely with respect to financial matters for a specified period or event. For example, the principal may need assistance managing their affairs while travelling overseas, or to satisfy any outstanding debts. It is typically in operation while the principal maintains decision-making capacity, but concludes once they no longer have the requisite capacity.
Enduring power of attorney
An EPOA is an enduring document allowing for the principal to appoint an attorney to make decisions on their behalf, but that appointment continues once the principal loses decision-making capacity. Capacity is typically considered in the context of cognitive function, whereby an adult is deemed to understand the nature and effect of various decisions.
Once an EPOA has been executed, the attorney has the capacity to step into the principal’s shoes to undertake the roles and responsibilities that the principal would otherwise lawfully execute. Depending on the nature of the document, the associated roles and responsibilities may include:
(a) financial matters, such as the principal’s financial or property affairs;
(b) personal matters, such as the principal’s care and welfare; and / or
(c) health-related decisions, such as the care and treatment of underlying health issues.
However, the attorney’s decision-making power may be activated depending on the terms of their appointment. For example, an attorney for personal matters (including health-related matters) can only exercise their power once the principal loses their decision-making capacity. Alternatively, the attorney’s power to make financial-related decisions specifically commences on either;
(a) a specified date;
(b) immediately upon execution;
(c) only in particular circumstances; and /or
(d) when the principal no longer possesses decision-making capacity.
Given the vast array of matters within an attorney’s decision-making discretion, the Act was enacted to regulate the duties and obligations which they must oblige. For example, the EPOA may stipulate the decision-making procedure where multiple attorneys have been appointed or provide instructions on how an attorney may exercise their powers generally. To that end, it is vital that attorneys carefully review the terms of the EPOA to ensure they are effectively executing their obligations.
Breaching an EPOA
An attorney may find themselves in hot water for violating their duties by deliberately or negligently mismanaging the principal’s affairs. In that regard, an attorney appointed under an EPOA must execute their duties with a heightened degree of vigilance, honesty and reasonable diligence to protect the principal’s best interests and avoid unsuspecting liability.
The most prevalent form of mismanagement relates to financial-related decisions. As a general rule of thumb, an attorney should always obtain independent legal advice before executing complex financial transactions or decisions. However, some critical sections of the Act govern financial management, which are summarised below.
Gifts or Donations
Attorneys are authorised to gift the principal’s property, provided it aligns with the principal’s conduct evinced while they still had capacity. Issues arise where there is a contrary intention in the enduring power, or the gift exceeds a reasonable amount compared to the principal’s overall financial position.
An attorney is prohibited from engaging in a transaction that blurs the line between an attorney’s duty and their interests. Such transactions may entitle the attorney or related third-party to a benefit at the principal’s expense and detriment. Examples of such conduct may include the attorney purchasing one of the principal’s assets or using the principal’s finances to make a personal loan.
An attorney must receive prior authorisation before investing in a new investment, and this authorisation is typically granted by the Queensland Civil and Administrative Tribunal or executed by a trustee.
Financial Management Strategies
An attorney must establish comprehensive financial management strategies when managing the principal’s finances, including keeping a detailed and accurate record of all transactions and dealings made whilst under the power and maintaining a distinct separation from the principal’s property.
In the circumstances where an attorney engages in the conduct mentioned above, the law will apply the presumption that the principal was induced into an offending transaction by undue influence at the hands of the attorney. In those circumstances, the attorney may be subject to criminal or civil liability under the Act depending upon the breach, including orders that they compensate the principal for any financial loss. If you fear that a principal may have engaged in a breach of the Act, we encourage you to seek legal advice immediately.
RAMSDEN LAWYERS – HOW WE CAN HELP
If you have been appointed as an attorney under an EPA, you must be aware of the dos and don’ts of lawfully exercising your responsibilities. If you are concerned that your conduct may contravene the Act, it is imperative that you seek legal advice immediately. Equally, if you consider an attorney is abusing their powers, you should seek legal advice as soon as possible to mitigate any further losses to your loved one.
If you require legal advice, Ramsden Lawyers can assist you. We are happy to arrange an obligation-free initial consultation to assist you in navigating a principal’s responsibilities under the relevant legislation, and recourse available for any potential breaches of the Act.
The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice. You should seek specific advice about your circumstances.