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The time may come when you need to make financial decisions on behalf of a parent as the Enduring Power of Attorney (EPoA). Is this an honour or a burden? It can be both, so the person taking on the role needs to understand both the legal obligations as well as family responsibilities.
Making decisions using an EPoA
A Power of Attorney is given the authority to make decisions and authorise transactions in relation to property and financial affairs. If it is an Enduring Power, this authority remains effective even after the donor has lost mental capacity – most important for an older person.
If you have been asked to take on these this role, before authorising any transactions you need to ensure you:
Act in the interests of the donor, and not your own interests
Place yourself in the shoes of the donor and determine what decisions they would make
Avoid conflicts of interest
Keep your own assets separate from the assets that you are managing for the donor, and
Keep accurate records of all actions taken and how you made decisions.
It is important that you can clearly demonstrate that every transaction is in the donor’s best interest. For example, you can’t just help yourself to an early inheritance, even if Mum or Dad are now in aged care and all their bills are paid. It is still their money, and it might be difficult to show that distributing money to yourself and your siblings is in the best interest of your parent.
If you can’t see a problem, just remember, there are very few families that don’t have a disagreement over a parent’s estate – even if it is just who will inherit a sentimental ornament. Beneficiaries of the estate could potentially take legal action against an EPoA if they don’t believe transactions were appropriate. If this occurs, you might be pleased that you kept good records.
However, if you used an Enduring Power of Attorney to make early inheritance gifts to yourself or other selected family members, this might leave you exposed to legal action from an aggrieved beneficiary – and if you lose, you could be personally liable to repay the money to the estate.
Choosing the right person
When making the decision of who to appoint as your Enduring Power of Attorney give it careful consideration. If you nominate more than one person, first think about how well they get along and whether they will be able to agree and make decisions.
Financial advice can provide valuable support for an EPoA to ensure appropriate financial decisions are made. Call us today on 07 56 667 223 to discuss.
IMPORTANT INFORMATION: The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. Current at 23 June 2023.
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