A Power of Attorney is an important legal document that allows you to appoint another person to make decisions and act on your behalf in relation to your financial and legal affairs.
Choosing an attorney is a significant decision because you are giving another person authority to deal with your assets, finances and legal matters. While most attorneys act responsibly, problems can arise where an attorney misuses their authority or fails to act in the best interests of the person who appointed them.
This is known as Power of Attorney abuse and can result in serious financial and emotional harm, particularly where the person who granted the Power of Attorney is elderly, vulnerable or has lost the ability to manage their own affairs.
What Is a Power of Attorney?
A Power of Attorney allows one person to appoint another person to act on their behalf.
The person making the appointment is known as the principal or donor, while the person appointed is known as the attorney.
A Power of Attorney may be used for many reasons, including:
- Allowing someone to manage financial transactions while you are overseas or unavailable;
- Assisting with paying bills, managing bank accounts and arranging services;
- Helping manage your affairs if you become unable to do so yourself due to illness, injury or declining health.
An Enduring Power of Attorney is different because it continues to operate even if you lose decision-making capacity in the future.
Because of the significant authority an attorney may have, it is important that the person appointed is trustworthy and understands their responsibilities.
What Is Power of Attorney Abuse?
Power of Attorney abuse occurs when an attorney uses their position improperly, acts outside the authority given to them, or fails to act in the principal’s best interests.
An attorney has legal obligations, including:
- Acting honestly and in the principal’s best interests;
- Keeping the principal’s money and property separate from their own;
- Keeping accurate records of financial transactions;
- Avoiding conflicts between their own interests and the principal’s interests; and
- Only using their authority for the purposes permitted by the Power of Attorney.
Examples of possible Power of Attorney abuse include:
- Using the principal’s money for personal expenses;
- Making withdrawals from bank accounts without proper explanation;
- Selling or transferring property for personal benefit;
- Failing to pay the principal’s bills or provide for their needs;
- Making financial decisions that benefit another person rather than the principal; or
- Refusing to provide information or records about financial transactions.
Unfortunately, Power of Attorney abuse is often committed by someone the principal trusted, including a family member or close friend. This can make recognising or reporting the abuse particularly difficult.
What Are the Signs of Power of Attorney Abuse?
It is not always obvious when an attorney is misusing their authority. Some warning signs may include:
- Unexplained changes to bank accounts or financial arrangements;
- Missing money, assets or important documents;
- The attorney refusing to explain financial decisions;
- Large gifts or transfers being made from the principal’s accounts;
- The principal’s lifestyle changing despite having sufficient assets; or
- The attorney preventing family members from communicating with or assisting the principal.
These signs do not automatically mean abuse has occurred, but they may justify seeking advice and investigating further.
How Can Power of Attorney Abuse Be Prevented?
Carefully choosing an attorney and understanding how a Power of Attorney works can help reduce the risk of misuse.
Some important steps include:
- Choose someone you trust: Your attorney should be someone who will respect your wishes and act responsibly. This does not necessarily need to be a family member.
- Understand the authority being given: Before signing a Power of Attorney, ensure you understand what decisions the attorney can make and when they can act.
- Obtain independent legal advice: A lawyer can explain your options and ensure the document reflects your intentions.
- Keep records: Maintaining copies of important financial and estate planning documents can assist if questions arise in the future.
Can You Cancel or Revoke a Power of Attorney?
If you still have the mental capacity to make decisions, you can generally revoke your Power of Attorney at any time.
The revocation should be completed properly and provided to the attorney. You should also notify any banks, government agencies or organisations that have relied on the previous Power of Attorney.
If you believe your attorney is acting improperly, obtaining legal advice before revoking the document can help ensure the correct steps are taken.
What Happens If an Enduring Power of Attorney Is Abused?
An Enduring Power of Attorney continues to operate after the principal loses capacity. This is useful because it allows someone trusted to manage their affairs when they cannot do so themselves.
However, it can also create risks if the attorney does not act properly.
If concerns arise about an Enduring Power of Attorney, protective bodies such as tribunals, guardianship authorities or courts may have powers to investigate and make orders to protect the principal.
Depending on the circumstances, these bodies may be able to:
- Review the attorney’s conduct;
- Suspend or revoke the appointment;
- Make orders about the management of the principal’s affairs; or
- Appoint another person to make decisions on the principal’s behalf.
Can Money Taken by an Attorney Be Recovered?
If an attorney has misused the principal’s assets, legal options may be available to recover losses.
Depending on the circumstances, this may include:
- Seeking repayment or compensation for financial losses;
- Taking steps to recover property or money transferred improperly;
- Applying for protective orders; or
- Reporting suspected fraudulent conduct to police.
Taking action quickly can be important because recovering assets may become more difficult over time.
How Can a Lawyer Help With Power of Attorney Abuse?
If you suspect an attorney is abusing their authority, obtaining legal advice early can help protect the principal’s interests.
A lawyer can assist by:
- Reviewing the Power of Attorney document and the authority provided;
- Assessing whether the attorney has acted improperly;
- Advising on options to revoke, challenge or review the appointment;
- Assisting with recovery of misused assets; and
- Helping protect vulnerable family members from further financial harm.
Get Advice About Power of Attorney Issues
A Power of Attorney can provide valuable protection when it is prepared carefully and given to someone you trust. However, attorneys must always act in the best interests of the person who appointed them.
At Somerville Laundry Lomax, our experienced wills and estates lawyers can provide advice about preparing, reviewing and dealing with disputes involving Powers of Attorney.
If you are concerned about possible Power of Attorney abuse or need advice about protecting someone’s financial interests, contact Somerville Laundry Lomax for assistance.
This article provides general information only and is not intended to be legal advice. You should obtain professional advice relevant to your circumstances.