Why make an Enduring Power of Attorney?
The person receiving your POA is the donee. The donee stands in your shoes. Whatever you can do, the donee can do. They can buy and sell property for you. They can operate your bank accounts.
Obviously, there are limits. Your donee cannot make a Will or vote for you.
Can the donee use your POA for personal gain? What if this helps you as well? What if your spouse or child taking your money is in your ‘best interests’?
An ‘enduring’ POA has a unique quality. If you become of unsound mind, the POA continues to operate. Your donee continues to stand in your shoes. But now we have a problem. Who is checking what your donee is doing?
How much power does the donee have? Can the donee use the POA for his own personal profit? Is this an abuse of power? Is it legal?
My son is dying. Can I use my wife’s POA to save our son?
The husband runs a business. Like all business owners, he has a high risk of bankruptcy. Therefore, he puts all his money into his wife’s name. But his wife loses mental capacity.
He needs $1m to pay doctors for their terminally ill son. Can the husband use his wife’s POA to pay for their son’s medical treatment?
Some states including NSW, QLD, VIC and TAS allow the husband to give gifts to relatives. However, all gifts are limited to special events not including medical benefits. Therefore, the husband cannot pay for his son’s medical treatment as a gift.
The husband has no power to draw finances under the POA for himself or their son for medical treatment. Sadly, the husband must act in good faith. He must only act in his wife’s best interest when using her finances. Saving the life of her son is not acting in her best interest. It is acting in her son’s best interest.
Queensland is the only state that allows the husband as POA to pay for their son’s medical treatment. (Some states and territories may allow the spending of the money, but only via court proceedings.)
Can children steal from their parents using a POA?
Your children hold your POA. As donees they control your finances. Can your children move assets from your name into their names?
You have dementia. Therefore, you lack mental capacity. You need to move into an aged care facility. But in doing so you lose all your money to the government. However, if your children use your POA to put a lot of your assets into their names, then you lose no money. Can the children do this under your POA?
The answer again is no. The children must act in the parent’s best interest under the POAs. Stealing their father’s assets is of no benefit to their father and is not acting in his best interest.
Buy a Ferrari using mum’s POA?
You and your mother dislike each other. You hold her POA. Your mother is sick and needs medical treatment. She is unable to drive a car. Despite your relationship, you decide to drive her to the hospital. Can you use your mum’s POA to buy yourself a Ferrari using her money?
Driving your mother to the hospital is acting in her best interests. Your mother is receiving benefit from your purchase of the Ferrari. (Obviously, you hold the Ferrari as bare trustee for your mum. After all, it is always her asset.)
A person holding a POA must act in the donor’s best interest. Driving your Mum to the hospital is in her best interests. And you need a car. And you may need to get there fast. So a Ferrari may be an acceptable purchase under Mum’s POA.
So the POA cannot be used to save a child’s life and it cannot be used to save tax. But it can be used so that a child can swan around in a Ferrari!
You can see the complex nature of POAs. Further, over 28% of POAs are incorrectly drafted and don’t work. About 13% of POAs prepared by lawyers do not work. So:
- Build your POA on our website.
- Speak to your accountant and financial planner before you use a POA to purchase something. This is if the person that gave you the POA is now of unsound mind.
Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
Australia wide law firm
Article written by Adjunct Professor, Dr Brett Davies and JD (UWA) candidate Adam Cajaglis, BA (UWA)