Powers of Attorney Act 2014: Protection of disabled and elderly from financial abuse

The issue

On 1 September 2015, the new Powers of Attorney Act 2014 (Vic) commenced operation in Victoria. The new regime is intended to assist in preventing financial abuse of the disabled and elderly and to make it easier for these people to give effect to their decisions.

Changes to law

Some of the key changes include:

1. The powers previously covered under an Enduring Power of Attorney (Financial) and Appointment of Enduring Guardian are now incorporated into one new document, simply called an Enduring Power of Attorney. New terminology of 'financial' and 'personal' areas of decision making is introduced. This document must be witnessed by a lawyer or a doctor and the appointment is immediately invalid, if the Attorney has any non-disclosed conviction for a dishonesty offence.
2. A completely new role of a Supportive Attorney is created and a separate legal document is required. A Supportive Attorney is designed to enable a person with capacity (but perhaps some other impairment or disability) to implement their wishes in a limited way. This attorney can access information on behalf of the donor and communicate their instructions to third parties. They are specifically prohibited from acting in 'significant financial transactions' ($10,000 or land transactions) and cannot continue to act if the donor loses capacity.
3. There are now clearer responsibilities and duties placed on Attorneys. In addition to an obligation to act honestly and not receive any financial benefit, there are also obligations to act diligently and to exercise reasonable skill and care. This raises an interesting question of whether an Attorney, who acts honestly but perhaps mismanages funds through lack of financial acumen, may be in breach of their duty and may consequently be liable for such breach.
4. The Victorian Civil and Administrative Tribunal ("VCAT") now has greater powers to make orders against Attorneys and require that an Attorney pay compensation for breaching their obligations. As discussed above, this could potentially include an Attorney who acts with the best intentions but mismanages funds. This compensation power extends past the death of the donor and so VCAT may order that an Attorney pay compensation to the estate of a deceased.
5. New criminal offences have been created for dishonestly obtaining a Power of Attorney and for dishonestly using a Power of Attorney for financial advantage. These offences carry a maximum five (5) year prison sentence and a substantial fine. The Medical Treatment Act 1988 (Vic) is not affected by the changes and an Enduring Power of Attorney (Medical Treatment) remains an important estate planning tool.

We expect that the changes in the law will have a real impact and will assist in the prevention of financial abuse of the elderly and disabled. In particular, the common scenario whereby a newsagent 'Attorney Kit' is put in front of an uncomprehending donor and witnessed by friends should be eliminated.

Practical Tip

We would always recommend that carefully considered and properly drafted Powers of Attorney be put in place well before you anticipate that they will be required. Significant power is transferred in these documents and, in absence of a valid appointment when the time comes, VCAT may be required to step in to appoint an Administrator and Guardian on your behalf.

Further, given the increased obligations on Attorneys and the potential to be liable for compensation, it may well be prudent for any Attorney to seek legal and financial advice regarding the management of a donor's affairs.

How can Sharrock Pitman Legal help me?

We have helped many people with their Powers of Attorney. Call our Accredited Specialist Wills and Estates Law team on 1300 205 506 if we can assist you.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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