Strict new controls over powers of attorney

By Matthew Gallagher, Senior Solicitor

First published in The Press 7 October 2008

Significant changes to the legislation for Enduring Powers of Attorney have just come into effect, prompted by concerns of misuse and inadequate protection.

The amendments impose stricter requirements for the establishment of EPAs and stronger duties on attorneys in carrying out their functions. These changes affect both existing and new EPAs.

What is an EPA?
An EPA allows one person (the donor) to give another (the attorney) power to make decisions on their behalf about property or personal care and welfare, or both. It usually comes into play when the donor becomes mentally incapable of making his or her decisions – often due to physical or mental disablement.

A property EPA allows the attorney to deal with the donor’s property, for example, a bank account or house. It can come into force immediately on signing or only in the event of mental incapacity. A personal care and welfare EPA permits decisions to be made only when the donor becomes mentally incapable.

An EPA is created by both parties signing a document in the form prescribed by the legislation. This can be prepared by your lawyer. Both the donor’s and the attorney’s signatures must be witnessed, which could previously be done by anyone.

There are now several new requirements to be met before an EPA can be signed. These are designed to ensure that donors fully understand the powers that they are giving to the attorney, and that they are not pressured into signing the EPA by the attorney.

From now on, the donor’s witness must be a lawyer, officer of a trustee corporation or a legal executive and must be “independent” of the attorney. The witness must certify that he or she has fully explained the rights and obligations under the EPA to the donor and that the donor was of sound mind and able to understand its effect.

Take this scenario: John and Sarah Brown want to appoint each other as their attorney, so consult the lawyer who acted for them when they bought their home.

Because John and Sarah’s lawyer has acted for them both, she is not considered under the new regime to be independent. Once the EPA is prepared, the couple will each need to obtain independent legal advice. So, in many instances it will now involve extra time and cost to get an EPA.

New safeguards
When Michelle’s father, Jack, began showing signs of dementia, Michelle took over his affairs in her capacity as attorney. She began selling his property (including his house) and keeping the proceeds for herself rather than using these for Jack’s care. She bought a new car, renovated her house and bought an all expenses paid trip to Disneyworld for herself and her two sons. As Michelle was the main beneficiary under Jack’s will, she rationalised this on the basis that “this is what Dad would have wanted and anyway, all the money is coming to me eventually under his will.

Concern over the misuse of EPAs has resulted in new safeguards being introduced along with restrictions on attorneys’ powers. Previously, a property attorney could, while the donor was mentally incapable, act for his or her personal gain or the benefit of others (including making gifts) to the extent that the donor could be expected to do so. While this power did not go so far as to justify Michelle’s actions, it did allow for small “indulgences” on the part of attorneys.

Now, the attorney will not be able to use his or her powers to benefit anyone other than the donor unless the donor has included an express provision in the EPA. These new requirements do not apply to existing property EPAs where the donor is already mentally incapable.

Continuing the example above, Michelle jealously guards her position as her father’s attorney against her two siblings, both of whom live out of town. Whenever they ask to be included in decisions, Michelle refuses, saying “Dad gave me the responsibility, not you. It’s up to me to make the decisions so what I do is none of your business.”

Under the previous regime, there was no duty for the attorney to consult with anyone or to act in a particular way. There was also no statutory obligation to keep financial records or to report to anyone unless the Court required this. Now there is a clear list of duties and obligations with which the attorney will need to comply, including providing information to anyone the donor has named in the EPA. So Jack could now include a requirement that Michelle involves her siblings.

Under a property EPA, an attorney’s primary obligation is to act in the donor’s best interests during any time that the donor is mentally incapable. This also includes actively encouraging the donor to develop his or her competence in managing his or her affairs. The property attorney must keep financial records of all transactions that he or she undertakes while the donor is mentally incapable and must also financially support any decisions made by the personal care and welfare attorney.

Personal care and welfare attorneys have similar duties. In addition, the attorney must also consider the financial implications of his or her decisions and must take into account any advance directives given by the donor, especially concerning medical treatment.

The consequences of breach of the duties will vary but the Court does have the powers to order the attorney to comply with his or her obligations and/or fine the attorney. In serious cases the Court can revoke the attorney’s appointment.

New certification requirements where the donor is mentally incapable
Joe holds a personal care and welfare EPA for his elderly mother, Doris. She is very independent and lives alone in the family home. But, she is becoming increasingly frail and forgetful. She has no other relatives or friends who live close by and, while Joe tries to pop in every day, he is concerned for her safety. Joe would like Doris to move to a residential care facility where she could still live independently but would have 24-hour support. Can Joe arrange this under his EPA?

Now, a personal care and welfare attorney can only act on any “significant matters” relating to the donor’s personal care and welfare where a medical practitioner has certified that the donor is mentally incapable. A “significant matter” is one that is likely to have an important effect on the health, wellbeing or enjoyment of life of the donor – for example, a major medical procedure or change of the donor’s residence. Unless the medical certificate specifies that the donor’s mental incapacity is likely to be ongoing, a new certificate will be required each time the attorney acts under the EPA. The attorney can still act on “non-significant” matters without obtaining medical certification provided the attorney has reasonable grounds to believe that the donor is mentally incapable.

If a property EPA only comes into effect once the donor becomes mentally incapable, a medical certificate is also required but there is no distinction between “significant” and non-significant matters.

The certification requirements do not apply to existing property EPAs where the donor is already mentally incapable, or the if EPA is not dependent on mental incapacity.

Conclusion
If you have an existing EPA you do not need to do a new one. However, the new criteria do allow you to be more specific about how you want your personal care and welfare arrangements and property affairs to be managed. You may wish to consider revising your EPAs to take advantage of these changes.

Any person acting as an attorney under an EPA should inform themselves about the new requirements to ensure they act in compliance with them.

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