Powers of (or not of) an Enduring Attorney
Oct 20
4 min read
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Mr Bloggs recently requested advice as to his capacity, as an enduring attorney for his mother, to make decisions on her behalf. Mr Bloggs’ mother has two children – Mr Bloggs and his sibling. Mr Bloggs’ mother is the sole shareholder, sole director and secretary of the corporate trustee of the Family Trust. She recently lost full legal capacity to deal with her financial matters. Mr Bloggs queried the extent to which he can deal with his mother’s assets and her position as director of the corporate trustee.
What is an enduring power of attorney?
A person has full legal capacity when he understands the nature and effect of any document that he/she is executing. An enduring power of attorney is a legal agreement that enables a person (referred to as “Donor”) to appoint a trusted person(s) to make financial and/or property decisions on his behalf in relation to his individual assets.
Appointment of an enduring attorney
A Donor can appoint:
a sole enduring attorney – who acts individually; or
more than one enduring attorney as joint attorneys – both of whom have to act in agreement at all times; or
more than one enduring attorney as joint and several attorneys – any one of them can act on behalf of the Donor.
Scope of an enduring attorney’s powers:
An enduring attorney can make decisions on behalf of the Donor:
whilst the person still has capacity, but may be physically unable to attend to financial matters or real property matters; OR
when the Donor has lost full legal capacity.
An enduring attorney has authority, depending on the terms of the enduring power of attorney, to deal with the Donor's individual assets in the Donor's best interests. For example, an enduring attorney can make decisions in relation to Donor’s individual assets like bank accounts, shares, cars, jewellery and real properties held in his individual capacity.
Limits of an enduring attorney’s powers
An enduring power of attorney does not bestow any position(s) held by the Donor on the enduring attorney. For example, an enduring attorney will not be bestowed with the position of a trustee of a family trust or a director of a corporate entity in place of the Donor should he lose his full legal capacity.
The above scenario could lead to a spectrum of possibilities, a few of which are outlined below.
Scenario 1: If Mr Bloggs was appointed as a sole enduring attorney, he may appoint another person to act as a director, including himself, as Mr Bloggs’ mother will be deemed to have vacated her position as director due to her incapacity. Whilst exercising his powers as an attorney, Mr Bloggs’ decisions have to be in the best financial interest of the Donor, and he cannot give any considerations to the best interest of the family as a whole. Depending upon the family relations between Mr Bloggs, his sibling and other family members, Mr Bloggs’ decisions may or may not be satisfactory to them.
Scenario 2: If Mr Bloggs and his sibling were in agreement as to Mr Bloggs exercising his powers as a sole enduring attorney, the appointment of a director to the company and the associated matters can be dealt with in a frictionless manner.
Scenario 3: If both Mr Bloggs and his sibling were both appointed as joint enduring attorneys, they could both agree to vote on the mother’s share and appoint two persons as directors of the company, including themselves, to facilitate a smooth transition of the company’s affairs into the hands of the newly appointed directors.
Scenario 4: If there was any disagreement between Mr Bloggs and his sibling as to exercising powers as an enduring attorney, Mr Bloggs will need to initiate appropriate judicial proceedings to seek orders to deal with the matters relating to the company and the family trust.
Positive revelations
On a review of the enduring power of attorney it was revealed that Mr Bloggs and his sibling were both appointed as joint attorneys by their mother. Mr Bloggs and his sibling (fortunately) shared a cordial relationship, which assisted them in coming to a consensus to deal with the mother’s shareholding in the company and the mother’s position as a director of the trustee company of the family trust.
Takeaway message(s)
If you run a business and act as the sole director and secretary of a company, it is important that your estate plan must addresses the issue of who should act as director in your place in the event of your physical or mental incapacity or death.
If you intend appointing more than one attorney (joint or joint and several attorneys), you need to think about whether they will be able to work together to manage your personal property and financial affairs.
We have the necessary expertise and would be glad to provide legal services relating to preparing an Enduring Power of Attorney or advice as to an existing Enduring Power of Attorney.