An enduring power of attorney is a document that allows a person to appoint one or more attorneys to make any financial or personal/health decisions that the person could lawfully have made, in the event that he or she becomes incapable of making such decisions.
An enduring power of attorney is an important estate planning tool, as it provides a mechanism by which the affairs of a person with impaired capacity can be managed.
According to statistics published by Dementia Australia:
- In 2018, there is an estimated 436,366 Australians living with dementia. Without a medical breakthrough, the number of people with dementia is expected to increase to 589,807 by 2028 and 1,076,129 by 2058
- In 2018, there are an estimated 26,443 people with younger onset dementia, expected to rise to 29,375 people by 2025 and 42,252 people by 2056.
Given the increasing number of people suffering from mental incapacity, laws relating to substitution of decision-making have been passed and are constantly being monitored, in an effort to protect the more vulnerable members of our society.
One of the primary legal responses to the issue of the increasing prevalence of incapacity in the Australian community has been the development of the concept of “enduring power of attorney” and in Queensland is governed by the Powers of Attorney Act 1998 (Qld).
Protection of the interests of persons without capacity
An enduring power of attorney has far-reaching implications, because the document will be used in circumstances in which the person who made the document – who is referred is to as the Principal, has lost the capacity to make decisions for himself or herself and is therefore vulnerable. Once the power begins, the attorney will have full control over decisions unless the enduring power of attorney explicitly limits those powers in the document.
For that reason, following the execution of an enduring power of attorney, the attorney is required to sign an “attorney’s acceptance” to acknowledge that he or she agrees to take on the responsibility of exercising the power they have been given by the document according to law.
Further, in order to protect the interests of the Principal, the law imposes a wide range of duties on attorneys.
The duties of attorneys
Broadly, the duty of an attorney is to act in the best interests of the person who made the enduring power of attorney,
This broad obligation is made up of a number of more specific duties.
- The duty to avoid entering into any “conflict transactions“, unless specifically authorised to do so. Conflict transactions are defined as transactions wherethereis,ormay be,conflict between:
- the duty of the attorney towards the Principal; and
- either:
- the interests of the attorney or a relation, close friend or business associate of the attorney; or
- another duty of the attorney.
- The duty to keep the attorney’s property separate from the property of the Principal.
- The duty to ensure that investments made on the Principal’s behalf are those authorised by the Trusts Act.
- The duty to ensure that the performance of the Principal’s investments is reviewed at least once each year.
- The duty to keep appropriate records of all financial transactions entered into pursuant to the enduring power of attorney.
- The duty, if two or more attorneys are appointed to act at the same time (whether jointly, severally or by majority), to consult with one another on a regular basis to ensure that the interests of the Principal are not prejudiced by a breakdown in communication between the attorneys.
- The duty to exercise the powers honestly and with reasonable diligence to protect the Principal’s interests. This obligation requires an attorney to attend to matters such as:
- paying the Principal’s outstanding bills on time;
- ensuring that the Principal’s property is appropriately insured;
- submitting income tax returns on the Principal’s behalf;
- if the Principal has a self-managed superannuation fund, ensuring that the fund remains compliant with regulatory requirements, as failure to do so could result in the fund losing the benefits of concessional tax treatment; and
- ensuring that the Principal has accommodation, care and support that is appropriate to his or her needs.
- The duty to obey any limitations or restrictions contained in the terms of the enduring power of attorney. For example, an enduring power of attorney may:
- specify that the attorney’s power to make decisions in relation to financial matters commences immediately upon the execution of the document, or only at a later date or on the occurrence of a particular event, such as when the person who made the enduring power of attorney is medically certified to no longer have the mental capacity to understand their affairs; or
- contain specific directions as to how the Principal’s affairs are to be managed.
- The duty to comply with the health care principle established by the Powers of Attorney Act 1998 (Qld) when making decisions in relation to health matters on the Principal’s behalf. The health care principle requires that the attorney’s power in relation to health matters should be exercised.
- The duty to comply with the general principles set out in the Powers of Attorney Act 1998 (Qld) when making decisions on behalf of the Principal. These principles include, but are not limited to, the following:
- the attorney should exercise his or her powers in a way that is appropriate to the Principal’s characteristics and needs;
- the Principal has the right to respect for his or her human worth and dignity as an individual;
- the Principal has the right to be a valued member of society;
- the Principal has the right to participate in decisions affecting his or her life to the greatest extent practicable;
- the Principal’s right to make his or her own decisions must be preserved to the greatest extent practicable;
- the Principal’s existing supportive relationships should be maintained to the greatest extent practicable;
- the Principal’s cultural and linguistic environment and values should be maintained to the greatest extent practicable;
- the Principal should be encouraged to achieve his or her physical, social, emotional and intellectual potential, and to become as self-reliant as practicable;
- the Principal should be encouraged and supported to live life as part of the general community and to take part in activities enjoyed by the general community;
- the Principal should be encouraged and supported to perform social roles that are valued in society.
The duty to comply with the health care principle established by the Powers of Attorney Act 1998 (Qld) when making decisions in relation to health matters on the Principal’s behalf. The health care principle requires that the attorney’s power in relation to health matters should be exercised:
- in the way that is least restrictive of the Principal’s rights; and
- only if the exercise of the power is:
- necessary and appropriate to maintain or promote the Principal’s health or well-being; or
- in all the circumstances, in the Principal’s best interests.
The Principal’s views and wishes must be sought and taken into account to the greatest extent practicable, along with the information given by the person’s health provider.
Consequences of failure to comply with duties
In the event that an attorney fails to comply with his or her duties, the Supreme Court of Queensland or the Queensland Civil and Administrative Tribunal have the power to make appropriate orders, declarations and directions to protect the Principal’s interests, including the following:
- an order that the attorney be removed from his or her role;
- an order that the attorney pay compensation to the Principal, or his or her estate;
- the imposition of fines on the attorney; and
- an order that the attorney pays the costs of the proceeding.
In what circumstances does an attorney’s powers end
An attorney’s powers continue for as long as the Principal is incapable of understanding the nature and effects of a decision and community that decision. For financial matters, the powers continue until it revoked by the Principal.