Abuse of Enduring Power of Attorney

Abuse of Power of Attorney – Everything you need to know

Abuse of Enduring Power of Attorney – Everything you need to know

Do you suspect abuse of a power of attorney for yourself or a loved one? Let us walk you through what you need to know.

Enduring Power of Attorney – What is it?

As part of your succession planning you should consider preparing an Enduring Power of Attorney. An Enduring Power of Attorney is designed to ensure that if you are ever in a situation where you cannot make your own financial decisions, someone can make these decisions for you. Some examples include if you have an accident and are in a coma, are stuck overseas or develop dementia.

We recommend that this power is limited so that it only comes into effect if/when you lose mental capacity. This ensures that you have as much control of your finances as possible, right up until you are in a position where you are unable to make the decisions.

One of the biggest risks with making an Enduring Power of Attorney is that the attorney you appoint could abuse their power. It is not uncommon to hear of people claiming that their elderly parent with dementia wanted them to have the family home, or that they happy for them to take all their funds from their bank account as a “thank you” for taking care of them.

It is important that you, the Principal giving any power to the Attorney, take steps to reduce the risks of your Attorney abusing their power.

There are some practical things you can do (eg provide a third party viewing only ability over your bank accounts to check from time to time in case your Attorney has moved large amounts of money).  You can also make limitations in your power of attorney documents and instructions to your bank.

What to do if you think someone is abusing your Power of Attorney

If you have a Power of Attorney that allows the person to act on your behalf while you still have mental capacity, you have a range of options to protect your assets if you suspect they are abusing their powers.

Some of the steps include:

    1. immediately revoke the Power of Attorney;
    2. file official paperwork with the Registrar of Titles to stop any further transfers of real estate (including putting your own caveat over your own land to discourage fraud);
    3. withdraw any bank signatory arrangements or other means by which the abuse is occurring; and
    4. apply to VCAT for compensation for any assets lost.

You can carry out the above steps only if you still have mental capacity to make your decisions and are able to revoke your Power of Attorney.

If you do not have capacity, it will be up to your nearest relatives to make these decisions for you or apply to VCAT to seek a cancellation of the power of attorney you previously made.

What to do if you think someone else is abusing the power of attorney of a friend or relative

If you are one of the nearest relatives to the principal  you can apply to VCAT for a review of the financial dealings by the Attorney.

VCAT has a wide range of options to protect people who no longer have capacity to make decisions or have limited capacity. VCAT can revoke Powers of Attorney and order compensation be paid for any lost assets.

If you suspect that someone is abusing their Power of Attorney it would be best to set out the points to a lawyer who can advise you if have a strong case at VCAT.

Solicitor’s duties if they are approached by their client’s attorney

It is very common for the Attorney to return to the solicitor who made the Power of Attorney for future legal work relating to the Principal. If the Attorney approached the Solicitors requesting that an asset of the Principal be transferred  to the attorney or another party, the solicitor still has to act in the best interest of the Principal and check everything out. If the solicitor cannot get full and clear instructions from the Principal, this is likely to raise red flags for a solicitor and it would be prudent for the solicitor to advise the attorney that they are unable to act due to a conflict of interest.

The Solicitor still has a duty to act in the best interest of the Principal so should warn the attorney of the issues and risks with their actions and remind them of their duties to ensure they are not doing this unawares. Usually an attorney will cease the action they were planning once there are aware reminded of their duties.

Duties of Attorneys

An attorney under an enduring power of attorney:

  • must act honestly, diligently and in good faith; and
  • must exercise reasonable skill and care; and
  • must not use the position for profit, unless permitted under section 70; and
  • must avoid acting where there is or may be a conflict of interest unless the attorney is authorised by the power, the principal or VCAT; and
  • must not disclose confidential information gained as the attorney under the power unless authorised by the power or by law; and
  • must keep accurate records and accounts as required by section 66.

If an Attorney fails to uphold any of these duties, they can be removed as Attorney and ordered to compensate the Principal for any loss. It is important that all attorneys remember these duties in all their actions undertaken for the Principal.

If you are unsure about your role as an Attorney under an Enduring Power of Attorney, a lawyer can help you understand what transactions you can or cannot make, for example gifts to grandchildren that are normally made annually of a small amount would normally be seen as compliant provided it was the intention of the Principal originally. In case you are an attorney and you you think you may have made transactions that do not comply with the duties, it’s not always the end of the world and a lawyer can explore ways to resolve the situation before it becomes a problem and goes to Court.

If you would like to know more about your rights as an attorney or to get further information- contact us today to take advantage of our free half hour legal consults. They can be done in person or via Skype or telephone conference. 

Call 03 8742 3199 or email info@rigolilawyers.com.au to make a booking and mention this article to claim your free booking.