What is a Power of Attorney
A power of attorney is a document which allows you as the “principal” to appoint somebody (referred to as your attorney) who can step in and make financial decisions for you should you become incapacitated. Your appointed attorney has the authority to access your bank accounts, pay bills on your behalf and buy and sell property for you. A power of attorney document is an essential document to consider and most clients will put a power of attorney in place when they are also doing their new will or updating their will documents.
If you do not have a power of attorney document in place and you subsequently do lose capacity then your family members will be stuck with not being able to manage your financial affairs and having to make an application to the Guardianship Division of the NSW Civil & Administrative Tribunal to seek an appointment of a financial manager on your behalf.
Rise in incidences where attorneys have abused their power
Given the level of power that an attorney can exercise over a person’s affairs it is unsurprising that many people are hesitant or even fearful of nominating somebody to be their power of attorney. It is nonetheless essential that people consider having in place a power of attorney document because in the event that you do become incapacitated nobody may be able to pay your bills or sell your property for instance if you need to move to a nursing home.
An attorney is bound by law to always act in the best interests of the principal who has appointed them. This means that the attorney when accessing the principal’s money should only be using the funds for the benefit of the principal. Despite what the law may be, there have been increasingly reported incidents of attorneys abusing their power by accessing the principal’s bank accounts and paying for their own personal expenses and/or making large gifts of the principal’s money to themselves. One recent example is where the attorney has transferred in excess of $600,000 from the principal’s bank account to themselves and claimed it was a gift.
What steps can be taken to minimise the risk of an abuse occurring?
As with all things the prevention is better than the cure. It is important when you are in the process of putting in place a power of attorney that you seek appropriate legal advice. You may be recommended to appoint at least two attorneys so there is some sort of check and balance.
If you suspect that a family member’s attorney has been taking advantage or abusing their powers it may be appropriate to approach the Guardianship Division of the NSW Civil & Administrative Tribunal who have the authority to review existing power of attorney arrangements. If the principal has already passed away and the executor of an estate suspects that prior to the principal’s death their attorney has been receiving gifts of money and/or property in breach of their duties as attorney then the executor may have an obligation to investigate and recover such funds for the deceased estate.
Please contact our Wills and Estate Planning team at Matthews Folbigg Lawyers on 9635 7966 if you would like advice or assistance.