Power of Attorney & Aged Care decision-making
The time may come when you need to make financial decisions on behalf of a parent as the Enduring Power of Attorney (EPoA). The person taking on the role must understand both legal obligations and family responsibilities.
Making decisions using an EPoA
A power of attorney is given the authority to make decisions and authorise transactions concerning property and financial affairs. This authority remains effective even after the donor has lost mental capacity if it is an enduring power of attorney. As we deal with our loved one's ageing, this is important to consider. Complications from a medical emergency such as a stroke to deterioration from dementia or other health concerns can leave your loved ones unable to make these decisions.
If you have been asked to take on 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 essential that you can 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 challenging to show that distributing money to yourself and your siblings is in your parent's best interest.
If you can't see a problem, remember, very few families don't disagree 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, suppose you used an enduring power of attorney to make early inheritance gifts to yourself or other selected family members. In that case, 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 deciding whom 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 agree and make decisions.
Financial advice can provide valuable support for an EPoA to ensure appropriate financial decisions are made.
Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 23 May 2022.
Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.