Parents won’t have an EPOA

As Jane’s parents age, she thinks it’s a good idea for them to have an enduring power of attorney in place but they won’t hear of it. Legal expert Rod Cunich advises Jane on how to tackle the discussion.

Q. Jane

I would like my parents to have an enduring power of attorney in place but they simply dismiss the idea, saying everyone knows what they want to happen if they are incapacitated in any way. I have tried to tell them that this isn’t enough – is there anything I can do to ensure we are covered legally should the worst happen?

A. Rod

First, let’s clarify the purpose of an enduring power of attorney (EPOA). It is a document by which a person (the principal) can authorise one or more people (the attorney/s) to make financial and legal decisions on the principal’s behalf.  It will continue to operate when the principal loses mental capacity.

An EPOA can commence at a time nominated by the principal.  For example, from the date the document is signed or only after the principal loses capacity.

So here is the response to your parents’ proposition: although you may know what they want to happen if they are incapacitated, in the absence of a valid EPOA you have no legal power or authority to implement their wishes. Transactions with third parties such as banks, council, service providers, insurance companies, retirement villages, nursing homes and Centrelink, to name just a few, simply can’t be undertaken on your parents’ behalf without an EPOA.

So why should they execute an EPOA now? The answer is simple – once they lose capacity it’s too late to execute an EPOA. And loss of capacity can occur unexpectedly at any time through accident or illness, such as a stroke.

What happens if there is no EPOA and they have lost capacity? You would have to apply to the relevant state tribunal to be appointed as their guardian, usually under the supervision of a statutory authority that has reporting requirements. This is a time-consuming and stressful exercise that can easily be avoided by executing an EPOA. In some states, financial guardians (even if a trusted family member) must pay a security bond as a condition of being appointed. At worst, a tribunal may appoint a stranger as guardian or a trustee company whose significant fees must be paid.   

Signing an EPOA is a no-brainer – but your parents must be cautious as EPOAs are often used by unscrupulous attorneys to feather their own nest. I’m not suggesting that you fall into this category but an attorney could use their power without consulting the principal – even if the principal still has capacity.

Therefore, those who execute an EPOA must ensure they select someone:

(a) they trust

(b) who understands their wishes

(c) who won’t mismanage or abuse their wealth.

With a few very limited exceptions, legally, only the appointed attorney can use their power – including the spending of money in accounts – for the benefit of the person who appoints them. 

So EPOAs are quite easy to misuse – sometimes fraudulently – but often, just ‘inadvertently’, and very hard to police. However, appointing a third party such as an accountant as the sole attorney or as a joint attorney with a family member can help hedge against misuse.

The other document that they should consider signing is the Appointment of Enduring Guardian which authorises a person to make decisions on their behalf; decisions concerning health and welfare matters in the event that they are unable to do so themselves. This document covers decisions such as where they live and what healthcare they receive. The document can also include directions about end-of-life decisions, often known as the Advance Healthcare Directives or Living Will provisions.  

Rod Cunich is a lawyer with over 30 year of experience who specialises in estate planning. If you have a question for Rod, simply email it to [email protected]

The information provided is general in nature. You should consult a qualified legal practioner before making any decisions.