Powers Of Attorney: When You Need Them It Is Too Late

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Too often people consider estate planning to be something for those recently retired or the elderly. While the presence of a new child, a new relationship or a new asset acquisition often prompts estate planning in the younger generation, the reality is that it is important to ensure it is kept up to date throughout your life. Almost everyone has assets to protect, whether they are superannuation, insurance, bank accounts or property. Being of a mature age should not be a consideration for proper estate planning; there are rarely clients whose affairs are so lacking in some form of complexity that advice is not required.

 

Starting your estate planning journey early stands you in good stead to protect yourself, your family and your wealth against the uncertainties of life. While a Will unfortunately is always needed eventually (nothing is certain but death and taxes), enduring powers of attorney are as important but often considered only necessary when a person is aging. While it would be helpful to know when a person may lose capacity, that is almost always impossible therefore having considered who you wish to appoint as your attorney for financial matters and also medical and guardianship issues early is vital.

 

Take the following example.  Frank is a young married man.  He has two young children and an exciting career which has allowed his family to live life comfortably. He does have debt but it is nothing his salary cannot cover.  As many of the assets were acquired prior to his marriage, they are in his name alone. He has ensured that he has sufficient life insurance and total and permanent disability cover, as well as income protection insurance to assist his family should anything happen to him.  He keeps putting off finalising his estate planning and has a will from prior to his marriage which is therefore invalid as his wife, Laura, was not the main beneficiary.  He was only 19 years old when he had the will prepared and when asked about an enduring power of attorney he did not think it would apply to him as he was too young.  Tragedy then struck Frank’s family and he was involved in a car accident which rendered him totally and permanently disabled.  He required round the clock care and was placed in an assisted living facility.  Laura, during this time of stress, was extremely grateful that Frank had ensured there would be sufficient funds available for his care and to allow for the family to continue to be supported, including paying off all debt. He was also provided with an income to continue to care for Frank and the children.  What was extremely stressful was the lack of enduring powers of attorney. Laura had no choice but to apply for administration and guardianship for Frank and endured a tribunal application and hearing during her time of grief. This was a necessity as the assets were in Frank’s name alone which gave Laura no authority to deal with them. She could not vary the mortgage, let alone pay it out and had difficulties accessing. As his administrator and guardian she is required to submit annual reports to the relevant guardianship board to confirm how she is managing his funds and her role is reviewed every few years which is a constant reminder of the lack of forward planning.

 

Estate planning is not something to set and forget. It is a process that is on-going and needs to be updated regularly. If we check back in on Frank’s family in fifty years, we see that Laura ensured she put in place valid enduring powers of attorney to assist her family if she were to lose capacity herself.  Unfortunately, she has begun to suffer from dementia and her son, Alex, has taken over her affairs. Five years ago, the family had been shocked to discover that Alex had a gambling problem which he was able to apparently overcome with their support. When he takes over his mother’s affairs, however, he decides to “pay” himself a small wage which steadily increases for his role and goes unchecked for a number of years. By the time his sister, Mandy, realises their mother has no funds left it is too late. The money is gone and Alex is unable to pay it back. There are several ways in which this unfortunate outcome could have been avoided:

 

  1. Regular reconsideration of attorneys, especially when one has proven themselves to be inappropriate;
  2. Ensuring there are “checks and balances” on attorney’s behaviour whether that be by always appointing more than one attorney jointly or providing for another person with the power to view the records for transparency;
  3.  Appointing an independent attorney such as a trustee company for a completely unbiased approach.

 

These case studies should highlight the importance of enduring powers of attorney for all adults. They should be regularly reviewed as a part of your estate planning and kept up to date.

 

 

If you would like to know more about how we may be able to help you plan for your future, either call on 1300 99 77 34 or email your enquiry to FinancialOptions@chan-naylor.com.au for a complementary initial consultation.

 

www.chan-naylor.com.au

 

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