The power of a power of attorney

Many people think that by signing a power of attorney, you hand over all of your rights to the person nominated. However, there are important limitations on how much power is given to the attorney.

It can be beneficial to grant a power of attorney in favour of a spouse or other trusted family member, to enable your financial affairs to be conducted if you lose your mental capacity through dementia or other cause. However, they can be open to abuse.

First, you should consider providing that the Power of Attorney does not apply immediately, and only comes into effect if a doctor certifies that you have lost your mental capacity. This will prevent any unauthorised use of the power in the interim. Apart from this, the law imposes certain restrictions on the misuse of powers of attorney.

Following the death of her mother, of one of our clients discovered that her sister had arranged for the mother to sign a power of attorney before her death. There were doubts as to the mother’s capacity to sign the power of attorney, but that is another story. Using the power of attorney, the sister arranged for the sale of the mother’s home unit.

The will left the home unit to our client, and the rest of the estate to the sister. However, when the mother died, the mother had no home unit to leave to our client, and the sale proceeds were part of the estate left to the sister.

We were able to solve the problem by relying on the Powers of Attorney Act. This contains a section stating that applies if you would have lost your entitlement under a will because an asset was removed from the estate under a power of attorney. It states that, although the asset is gone, you are entitled to the proceeds. Using that section, we were able to obtain the proceeds of the sale of the home unit for our client.

For information on powers of attorney, please contact Stephen LynchPhoebe Mayson orEmily Priestley.






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