A Power of Attorney is a legal document that allows another person to make financial and legal decisions on your behalf. You can use a Power of Attorney when you cannot manage your affairs yourself, such as when you are travelling, become unwell, or lose capacity.
A Power of Attorney is commonly prepared to:
- complete financial or legal transactions when you are unavailable;
- assist with everyday tasks such as managing bank accounts, paying bills and arranging services; and
- ensure a trusted person can manage your financial affairs if you become physically or mentally incapacitated.
Each Australian state and territory has its own laws relating to Powers of Attorney. While many jurisdictions recognise documents made elsewhere in Australia, the legal effect can vary depending on where the document was created and where it is used.
The person who creates a Power of Attorney is known as the principal or donor. The person appointed to make decisions on their behalf is called the attorney.
What is Power of Attorney abuse?
Power of Attorney abuse occurs when an attorney uses their authority improperly or fails to act in the best interests of the principal.
An attorney has a legal responsibility to:
- act in the principal’s best interests;
- keep accurate records and separate accounts;
- avoid conflicts of interest; and
- only make decisions within the authority granted under the Power of Attorney.
Unlike some other legal roles, attorneys are generally not required to report regularly to a supervising authority. This makes choosing a trustworthy attorney extremely important.
Power of Attorney abuse may occur when an attorney:
- fails to pay for the principal’s essential expenses;
- makes decisions without properly considering the principal’s wishes;
- uses the principal’s money for personal benefit;
- gifts or transfers the principal’s assets without proper authority; or
- acts outside the powers provided by the document.
This type of financial abuse often affects older people or those who have lost capacity. However, it can happen in any situation where a person gives another individual control over their financial affairs.
In many cases, the person responsible is someone the principal trusted, such as a family member or close friend. The impact can be significant, causing financial loss, emotional distress and family conflict.
An attorney who misuses their authority may need to repay losses caused by their actions and could face legal consequences. Recovering funds can become more difficult if the abuse continues for an extended period.
How to protect yourself from Power of Attorney abuse
Choosing the right attorney and understanding your legal rights can help reduce the risk of abuse.
Consider the following steps:
- Choose someone you trust: Your attorney does not need to be a family member. Select someone who understands their responsibilities and will act in your best interests.
- Obtain independent legal advice: Do not sign a Power of Attorney unless you understand the document, the authority you are giving and the consequences of the appointment.
- Review your appointment regularly: If your circumstances change or you no longer trust your attorney, seek legal advice about revoking or updating your Power of Attorney.
- Keep documents organised: Ensure your attorney, financial institutions and relevant organisations have the correct information if the document becomes active.
You can generally revoke a Power of Attorney while you still have legal capacity. The revocation should be completed in writing and provided to your attorney and any organisations that rely on the document.
What to do if a Power of Attorney is abused
If you suspect an attorney is misusing their authority, you should seek legal advice as soon as possible.
Warning signs may include:
- missing financial records or unexplained transactions;
- an attorney refusing to provide receipts or account information;
- unexpected changes to bank accounts or property ownership; or
- decisions that appear inconsistent with the principal’s wishes or interests.
If the principal has lost capacity, the process can become more complex. An enduring Power of Attorney usually continues after a person loses capacity, meaning it may require action through the relevant state or territory authority to review or suspend the appointment.
Each Australian state and territory has laws designed to protect people from financial abuse and misuse of authority. Depending on the circumstances, government bodies, tribunals or courts may investigate concerns, review the appointment, suspend an attorney or make orders to protect the principal.
For example, in New South Wales, the NSW Civil and Administrative Tribunal (NCAT) can hear certain guardianship and Power of Attorney disputes and make orders relating to financial management and substitute decision-making.
Other legal options may also be available, including placing a caveat over property to prevent an unauthorised transfer, seeking compensation for financial loss, or reporting fraudulent conduct to police.
Can you revoke a Power of Attorney?
A principal can generally revoke a Power of Attorney at any time while they have legal capacity.
However, if the principal has lost capacity, additional steps may be required. A family member or another interested person may need to apply to the relevant tribunal or authority for assistance.
Obtaining legal advice early can help protect the principal’s assets and determine the most appropriate course of action.
Conclusion
A Power of Attorney is an important estate planning tool that allows a trusted person to manage your financial and legal affairs when required.
However, appointing an attorney involves significant responsibility. Both the principal and attorney should understand their rights and obligations before entering into the arrangement.
Attorneys must always act in the best interests of the principal. If you are concerned about possible abuse, are unsure about your responsibilities as an attorney, or need assistance revoking a Power of Attorney, obtaining legal advice can help protect your interests.
This information is general in nature and does not replace legal advice specific to your circumstances.
If you or someone you know requires assistance with a Power of Attorney dispute, recovering misappropriated funds, or estate planning advice, please contact us on (02) 9818 2888 or email [email protected].