Enduring powers of attorney are crucially important documents when it comes to estate planning. While a Will governs what happens to a person’s assets when they pass away, an enduring power of attorney for financial matters authorises a person (or people) to manage that person’s assets while they are still alive but have lost the capacity to do so for themselves.
Without an enduring power of attorney, where a person loses capacity to make decisions for themselves, it would be necessary for someone to apply to the Victorian Civil and Administrative Tribunal (VCAT), leaving the decision about who acts on behalf of the incapacitated person up to a tribunal, rather than the person themselves.
In Victoria, it is possible to appoint someone to act for you for financial, personal and medical treatment decisions, however the focus of this article is appointing an attorney for financial decisions.
We set out some key tips below for helping to select your financial attorney, including some implications you may not have considered:
1. It should be someone you trust
It might go without saying, but the person you appoint to act as your financial attorney should be a trusted person.
The attorney’s obligation is to act in your best interests in respect of any decision they may make on your behalf.
2. You need to consider any potential for conflict of interest
As set out above, an attorney’s obligation is to act in your best interests. For financial matters, this essentially means that their obligation is to use your money for your benefit only, unless you authorise them to do otherwise in your document.
The concept of an attorney acting in conflict of interest typically arises where a person appoints their spouse in this role. Many people assume that their spouse will also be permitted to benefit from their assets when acting as attorney, as they may do while both parties have capacity.. Importantly, this is not the case, unless the document is specifically prepared to permit the attorney to act in conflict transactions.
Permitting an attorney to act, despite a potential conflict of interest, needs to be carefully considered alongside the person’s broader estate planning objectives, particularly if there is an intention to place any restrictions on the control or depletion of assets passing under the Will of that person, for example, by including a life interest trust.
In addition, it is not unusual for people to consider appointing their trusted advisors as financial attorneys. It will be important for the advisor to consider any potential conflict of interest they may have in continuing to provide advice, while acting in this role.
3. Your attorney will be authorised to take over controlling positions in your SMSF
A person appointed as an attorney under an enduring financial power of attorney will be authorised under the superannuation legislation to take over the directorship of a corporate trustee, or the trusteeship of a self managed superannuation fund (SMSF).
Here, it is imperative to consider whether the person appointed is appropriate to take over various discretions available to them under the deed for the SMSF, as well as any further documentation that should be put in place to ensure that estate planning objectives in respect of payment of your superannuation after the member dies will be met (for example, a binding death benefit nomination with provision in the enduring power of attorney that this nomination cannot be revoked).
4. Attorneys are not specifically authorised to step into a company director’s role
Enduring powers of attorney for financial matters do not provide an automatic right for the attorney to act in relation to any company positions you may hold, for example, as a company director
When considering who may step into these company positions, companies will typically have a procedure for appointing alternate directors under its constitution, which would need to be followed in the event of a requirement for someone to act in the place of a current director.
5. Consider any impact on gifts made in a Will
If you are intending to make any specific gifts of assets in your Will (see related article here), you may wish to make your attorney aware of these intentions.
Unless otherwise limited in their powers, an attorney will typically have a broad discretion over the access of your assets for your benefit. If, for example, you have made arrangements in your Will to gift a certain asset to a specific person, and during your lifetime that asset is sold by your attorney, this will interfere with your objectives.
The above situation can be addressed with careful planning and drafting in both the Will and enduring power of attorney documents.
How we can help
Considering who you should appoint as your attorney is not a decision that should be made in isolation. Given the broader impacts that it can potentially have on your estate planning as a whole, it is important that the decision is made carefully. We can assist with the specialised preparation of documentation to ensure that your intentions can be achieve.
Please contact us for more detailed and tailored help
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