The time may come when you need to make financial decisions on behalf of a parent as the Enduring Power of Attorney (EPoA). Is this an honour or a burden? It can be both, so the person taking on the role needs to understand both the legal obligations as well as family responsibilities.

Making decisions using an EPoA

A power of attorney is given the authority to make decisions and authorise transactions in relation to property and financial affairs. If it is an enduring power, this authority remains effective even after the donor has lost mental capacity – most important for an older person.

If you have been asked to take on these this role, before authorising any transactions you need to ensure you:

  • Act in the interests of the donor, and not your own interests
  • Place yourself in the shoes of the donor and determine what decisions they would make
  • Avoid conflicts of interest
  • Keep your own assets separate from the assets that you are managing for the donor, and
  • Keep accurate records of all actions taken and how you made decisions.

It is important that you can clearly demonstrate that every transaction is in the donor’s best interest. For example, you can’t just help yourself to an early inheritance, even if Mum or Dad are now in aged care and all their bills are paid. It is still their money, and it might be difficult to show that distributing money to yourself and your siblings is in the best interest of your parent.

If you can’t see a problem, just remember, there are very few families that don’t have a disagreement over a parent’s estate – even if it is just who will inherit a sentimental ornament. Beneficiaries of the estate could potentially take legal action against an EPoA if they don’t believe transactions were appropriate. If this occurs, you might be pleased that you kept good records.

However, if you used an enduring power of attorney to make early inheritance gifts to yourself or other selected family members, this might leave you exposed to legal action from an aggrieved beneficiary – and if you lose, you could be personally liable to repay the money to the estate.

Choosing the right person

When making the decision of who to appoint as your enduring power of attorney give it careful consideration. If you nominate more than one person, first think about how well they get along and whether they will be able to agree and make decisions.

Financial advice can provide valuable support for an EPoA to ensure appropriate financial decisions are made. Contact us today on 02 6813 0977 to make an appointment.

This article is for informational purposes only and the information contained is of a general nature and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from a professional financial adviser who can consider if particular strategies and products are right for you. In all instances where information is based on historical performance, it is important to understand this is not a reliable indicator of future performance. You should not rely on any material on this website to make investment decisions and should seek professional advice.
Foundation Wealth Planners ABN 84 612 059 622 is an Authorised Representative No. 1242404 and Credit Representative No. 488134 of FYG Planners Pty Ltd, AFSL/ACL No. 224543 ABN 55 094 972 540
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