Power of Attorney Laws Carry Legal Responsibilities and Risks

© July 2005 by Joe Lederman, BALDWINS Australian Lawyers and Consultants

Whenever a Will is prepared, it is vitally important to consider having an Enduring
Power of Attorney drawn up too. This is because a Will takes effect only on death, but
if the person gets Alzheimer's or suffers a stroke or other serious disability, the
absence of a Power of Attorney might make it difficult for the family to look after the
person. In the absence of a Power of Attorney it may be necessary to apply for
guardianship and this can create problems of its own, including family arguments and
incurring additional cost.

Restricting the Attorney

However, if you want a Power of Attorney to be drawn up, the law now requires
clearer instructions than ever before. The Power of Attorney can be general or be
limited, such as:

· limiting the power so that it will only operate once the person ("donor") loses
capacity; in this situation, a medical certificate will need to be provided.
Furthermore, the donor will also need to provide a signed consent to disclose
medical information;

· specifying in the power exactly what assets or in what order the attorney (i.e.,
the person being granted the power) should deal with or sell in the event that
such action(s) become necessary. (Note that this is an important consideration
to make where a donor has made specific provisions in their Will for certain
assets to go to specified individuals);

· limiting the type of investments that can be made by the attorney;

· specifying that certain charitable donations or gifts are to be continued and
when such donations or gifts should be made;

· where a professional person or trustee company is appointed attorney,
specifying the agreed fees; or

· limiting the attorney's power so that, for example, real property cannot be
mortgaged or sold whilst a certain family member is still living there.

In the absence of any such conditions or restrictions, the appointed attorney has a
carte blanche!

Accurate Records

The donor must understand what they are doing to avoid a later legal dispute over
whether they understood the consequences of giving the power to the appointed
attorney.

A record should be kept of the discussions when the instructions are given in relation
to the power of attorney. This should include a record of any legal advice, all
explanations, responses and/or instructions.

The new laws also require the appointed attorney to maintain an accurate record of all
dealings and transactions made using the Power of Attorney, even if the Power of
Attorney was created prior to the new laws coming in on 1 April 2004.

Acceptance of the Power

Apart from the formalities of preparing and arranging for signing and witnessing, the
legislation specifies that the Power of Attorney does not become legally effective until
and unless the appointment is accepted by the attorney in the form of a signed and
dated statement. This statement from the attorney must include the following:

· an undertaking that the attorney will exercise the powers conferred with
reasonable diligence to protect the donor's interests;

· an undertaking that the attorney will avoid acting where there is any conflict of
interest between the interests of the attorney and the interests of the donor; and

· an undertaking that the attorney will exercise the powers conferred by the
enduring power of attorney in accordance with the Instruments Act 1958.

The attorney must not use the power until this statement of acceptance is signed.

Revoking the power

A power of attorney can be revoked either orally or in writing by:

· telling the attorney that his/her power is withdrawn;
· destroying the power of attorney document and all copies;
· including a provision in the Enduring Power of Attorney which provides for
revocation;
· the donor's death;
· the attorney's resignation, incapacity, insolvency or death;
· the Victorian Civil and Administrative Tribunal.

Warning: It is best that a donor avoids revoking a power orally because even where
the revocation is by oral means, a new power will need to be executed.

A power of attorney can also be revoked where an inconsistency arises between
appointed attorneys (i.e., where an attorney appointed at a later stage has been given
the same powers as an attorney who was appointed earlier). However, legal disputes
can arise where there are multiple or alternative attorneys.

Multiple or Alternative attorneys

The new laws have created some uncertainty on the appointment of more than one
attorney, and it might well be arguable that such appointments are not permitted. The

Legal Practitioner's Liability Committee is seeking a review of the legislation in this
regard.

Alternative attorneys

The laws currently allow a donor to appoint an alternative attorney to cover the event
of the death, temporary absence or legal incapacity of the appointed principal
attorney. In the case of incapacity of the principal attorney, it would be important that
the donor define what is meant by incapacity and provide a means by which to
identify when a principal attorney is to be considered incapacitated and to arrange for
a consent form from the appointed principal attorney in favour of someone (such as
the alternative attorney) to disclose medical information.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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