Financial power of attorney

Power of attorney

A power of attorney is a document that appoints a person (the attorney) to act on behalf of the person who gives the power (the donor or principal).

The attorney can make decisions about the principal's property or financial affairs. They can operate the principal's bank accounts, pay the principal's bills and sell or buy property or shares on behalf of the principal.

Types of power of attorney

General power of attorney

Limits can be specified, but if they are not specified then the attorney can make any financial or legal decisions on the donor's behalf until the power is changed, cancelled, the donor loses capacity or dies.

Enduring power of attorney (financial)

The date the power is activated and the responsibilities given to the donor can be specified. For example, the document may specify that the power will only take effect when capacity is lost, and it’s verified by medical evidence.

More than one attorney can be appointed to act at the same time and the appointment may be joint.

Guardianship

Guardianship is the appointment of a person (a guardian) to make decisions for an adult with a disability (the represented person) when they are unable to do so.

A guardian is a person or organisation appointed by a guardianship board or tribunal to make personal lifestyle decisions for someone with a disability, who is unable to make these decisions themselves.

A guardian may be authorised to make decisions about living arrangements, work arrangements, medical treatment and access to people and services.

Administration

A person (an administrator) is appointed by a tribunal to make financial and legal decisions for an adult with a disability (the represented person) when they are unable to do so for themselves.

Disability means:

• intellectual impairment
• mental disorder
• brain injury
• physical disability
• dementia.

The default position for decision-making is complete autonomy. Sometimes, if a person has a disability, this is not possible.

The Intellectual Disability Rights Service advocates the following guiding principles, where it is proven that it’s in a person's own best interest for their decision making to be supported or substituted:

• the wishes, opinions and choices of the person must always be sought and considered first
• the privacy, cultural diversity and integrity of the person must always be respected
• the least restrictive and intrusive intervention into the person’s life
• the ability to make decisions (legal capacity) is a fluid concept that may vary from time to time and from decision to decision – it should not be regarded as a static, unchanging and one-time only classification
• diminished decision-making ability should not be confused with difficulties or impairment in communication – people should be provided adjustments and alternative modes of communication to express themselves
• substitute decision-making is an absolute last resort
• records must always be kept about supported and substitute decision-making arrangements (informal and formal) and decisions made to ensure processes are transparent, subject to independent review and (if necessary) to appellate review by courts
• informal arrangements and support from family members, carers or friends who have close and continuing relationships with the person are preferable to formal orders of guardianship and financial management
• support provided to the person to make decisions must always be in the best interests and welfare of the person.

People appointed under a power of attorney should keep these principles in mind when acting as an attorney.

A client's decision to appoint a power of attorney

People are advised to make a Will, while they have capacity, and to review it regularly to ensure it is up to date. They are also advised to execute an enduring power of attorney (financial). In fact, the Office of the Public Advocate in Victoria recommends that everyone over 18 years of age should consider the need to make an enduring power of attorney (financial), as loss of capacity can happen at any age.

The person who is nominating a power of attorney to make financial and legal decisions for them is known as a “donor” or “principal”.

An enduring power of attorney remains valid after a person loses the capacity to make their own decisions.

The attorney must:

• exercise their powers in the interests of the donor
• wherever possible make the same decision that the donor would make
• avoid conflicts of interest
• keep their own assets separate from those of the donor
• keep accurate records of dealings and transactions.

Donors are advised to appoint someone:

• they trust to be their attorney
• they are confident will act in the donor's best interests and take their wishes into account
• who has money-management skills
• who doesn’t have any existing health or personal issues, such as with alcohol, drugs or gambling, that may affect their ability to carry out the role.

It is usual for a family member or friend to be selected, although this is not necessarily the only or most suitable option. It cannot be assumed that family members have the necessary knowledge and skills to be able to carry out the role effectively.

In some cases, it may be advisable to nominate a professional to act as their attorney. A CPA Australia member may be asked to take on that role.

Accepting an appointment as a client’s power of attorney: some considerations

If you are asked to assume the role of attorney for a client, consider the following:

• You are required under the professional code of ethics to avoid conflicts of interest. Acting as the client’s adviser, attorney and accountant may pose some challenges of potential conflict.
• Consider the family relationships and if there is the potential for disputes in the future.
• Older people are often reluctant to incur additional costs.
• Attorneys other than professional attorneys do not usually charge fees.
• The fees applicable under the arrangement should be clearly outlined at the start of the arrangement.
• If the person is insistent that they would like you, as their accountant, to also accept appointment as their attorney, the following is recommended:
  • You may suggest an alternative, perhaps a member of the family.
  • Another option may be two members of the family, appointed jointly, or jointly and severally.
  • Another alternative may be for you to be appointed attorney jointly and severally, with a member of the family jointly.
• Insist that the donor get independent legal advice before appointing the attorney.
• Ensure that there is a Letter of Engagement, describing why you have been selected as the attorney, defining the terms of the appointment, the triggers for its implementation and defining expressly the person's objectives, priorities and wishes for the management of their affairs should they lose competence.
• Ensure there is professional confirmation of the person's capacity to make the appointment at the time the power of attorney is executed.
• Recommend that another accountant take over the role as the client’s accountant and, perhaps, as accountant for other family members.
• It is advisable for the donor to periodically review the terms of the Power of Attorney, and the person appointed as their attorney.