Enduring attorneys play a crucial role in safeguarding the interests of individuals who lose the capacity to manage their own affairs. Appointing an enduring attorney is an important part of estate planning, but it also carries significant responsibilities and risks. Attorneys are entrusted with making decisions that can have lasting effects on the principal’s financial and personal well-being.
Professional advisers, such as accountants and financial advisers, may also act on behalf of an incapacitated client through their enduring attorney. For these advisers, understanding the role of the enduring attorney is vital to providing accurate advice, meeting legal obligations and protecting their client’s interests.
Despite their best intentions, enduring attorneys often make mistakes that can result in disputes, financial loss and even legal consequences. It is crucial for anyone acting as an enduring attorney to understand the most common pitfalls. This article outlines six frequent mistakes made by enduring attorneys and provides practical guidance on how to avoid them.
1. Invalid Enduring Power of Attorney (EPOA)
A common mistake is failing to ensure the EPOA document is valid. Each state has its own laws; in Queensland, this is governed by the Powers of Attorney Act 1998 (Qld). These laws set out strict requirements for signing, witnessing, and the principal’s capacity at the time of signing. If the document is not properly completed or witnessed, it may be invalid, leaving the principal without a legally recognised enduring attorney. Enduring attorneys should always check that the EPOA complies with all legal requirements before acting.
Advisers who rely on invalid EPOAs also face significant risks. Actions taken under an invalid authority may not be legally effective, and advisers could be held responsible for any losses or issues affecting the principal or third parties. Their professional conduct may also be called into question. If advisers fail to take reasonable steps to verify an EPOA’s validity before proceeding, they could face serious consequences.
2. Conflicts of interest
Enduring attorneys must act in the best interests of the principal and avoid any conflicts between their own interests and those of the principal, unless the EPOA explicitly includes a waiver. A common mistake is making decisions that benefit themselves or their family – such as transferring assets or making gifts – without proper authority.
A conflict transaction occurs where there is, or may be, a conflict between the attorney’s duty to the principal and the interests of the attorney, their relatives or associates. For example, section 73 of the Act prohibits an attorney from entering into a conflict transaction unless the EPOA expressly authorises it or QCAT provides approval. Breaching these provisions can render the transaction invalid and may expose the attorney to civil or criminal liability.
It is essential for enduring attorneys to be familiar with these requirements and to seek legal advice before proceeding with any transaction that might involve a conflict of interest. They should seek advice if they are unsure whether a conflict exists and how to manage it.
3. Seeking professional advice
Enduring attorneys often assume they can manage all matters alone, but complex financial, legal or medical decisions usually require specialist advice. The Act imposes a duty on attorneys to exercise their powers with reasonable skill and care and to act in the principal’s best interests. Handling complicated issues without proper professional input can lead to poor outcomes for the principal and may expose the attorney to personal liability if their actions are negligent or exceed their authority.
To fulfil their obligations under the Act, enduring attorneys should consult professional advisers – such as accountants, lawyers or financial advisers – when faced with unfamiliar or complex matters. Seeking professional advice helps ensure decisions are made in accordance with the principal’s wishes and best interests, while also protecting the attorney by demonstrating that they have acted prudently and responsibly.
4. Communication
Poor communication is a common source of disputes when an enduring attorney acts for a principal. Attorneys may fail to keep key parties – such as family members, carers or health professionals – informed about important decisions or changes in the principal’s circumstances. This lack of information can create mistrust, uncertainty, and, in some cases, formal challenges to the attorney’s authority.
While the Act requires attorneys to respect the principal’s privacy and confidentiality, it also obliges enduring attorneys to act in the principal’s best interests and to support their relationships with family and close friends. This means attorneys should, when appropriate, communicate openly with family members about significant decisions affecting the principal.
A common communication issue occurs when an enduring attorney decides to move the principal into residential care without adequately informing or consulting close relatives. This can cause family tensions, including allegations that the attorney is not acting in the principal’s best interests. By proactively explaining the reasons for such decisions and involving relevant parties where appropriate, enduring attorneys can help prevent unnecessary conflict. Broadly, keeping family informed while respecting the principal’s wishes helps maintain trust, ensure transparency and reduce the risk of disputes.
5. Intermingling finances
Enduring attorneys have strict legal obligations to manage a principal’s finances with care, diligence and honesty. One of the most important duties is to keep the principal’s money and assets separate from their own. Section 86 of the Act requires enduring attorneys to keep their property separate from the principal’s, except in limited circumstances such as jointly owned property.
If an attorney intermingles their own money with the principal’s funds, they may be found to have breached their duties under the Act. This can result in legal consequences, including removal as enduring attorney.
To comply with their obligations, enduring attorneys should always use separate bank accounts for the principal’s finances and avoid shared financial arrangements unless they have obtained advice confirming it is appropriate.
6. Record keeping
Section 85 of the Act requires enduring attorneys to keep and preserve accurate records and accounts of all dealings and transactions made on behalf of the principal. Failure to maintain accurate and complete records is a common cause of disputes.
Failing to keep accurate and full records can lead to allegations of misconduct, difficulties defending decisions, and complications with estate administration or claims after the principal’s death. Good record keeping provides transparency and protects both the principal and the enduring attorney if questions arise about the management of the principal’s affairs.
Conclusion
Taking on the role of an enduring attorney is both a privilege and a serious responsibility. Whether you are acting as an enduring attorney or advising one, it is essential to understand your duties. By being proactive and seeking guidance when needed, you can avoid common pitfalls and ensure your actions protect the principal’s interests.
For assistance or to discuss any aspect of enduring powers of attorney, please contact our experienced private client team for expert advice.
