Loss of capacity is not something that only happens to old people
People often think about losing capacity as something that happens later in life, for example caused by age related illnesses such as dementia. This is certainly becoming more common, especially with Australia’s aging population.
But loss of capacity can unfortunately occur at any stage of life, for example brain injury caused by a car accident or a work accident.
A complete estate plan includes managing loss of capacity at any stage of life by the making of an effective power of attorney and guardianship appointment.
There are 2 steps to manage in making a power of attorney and guardianship appointment
1st, careful thought and planning
Making or reviewing an effective enduring power of attorney and guardianship appointment requires careful thought and planning.
2nd, intervening if things go wrong
Hopefully, everything will go according to plan, but if it doesn’t, and it is too late to revoke an appointment because the person that made it has since lost their capacity, it may be necessary to take steps to intervene. That step too requires careful thought and planning by those taking it.
A bit of background: what is a power of attorney and guardianship appointment?
A power of attorney is a legal document that someone, called the principal, signs to appoint someone else (called the attorney) to represent the principal in legal and financial transactions.
The power of attorney can start when the principal decides and as is set out in the document.
A general power of attorney is a power of attorney that ceases to operate if the principal loses their capacity.
An enduring power of attorney is a power of attorney that continues to operate after the principal has lost their capacity.
A guardianship appointment is a legal document that the principal signs to appoint someone (called a guardian) to make lifestyle, welfare and medical decisions for the principal such as where they are to live, what medical treatment and what care services they are to receive.
A guardian only has authority after the principal loses their capacity to make decisions for themselves.
Commonly, spouses will appoint each other as attorney and guardian and then one or more of their children as a substitute if the spouse cannot do it.
The 1st step – careful thought and planning
Careful thought and planning when making the appointments is the first way to avoid problems later on.
Long Saad Woodbridge Lawyers’ 7 standard rules to use in making decisions about how to structure your estate plan are set out here.
Rule 1 – The golden rule is to manage EXPECTATIONS.
Rule 2 – There is no correct ANSWER. It is about making informed decisions.
Rule 3 – TRUST MODEL – unless there are good reasons not to, trust those that will be in control of your wealth while administering your estate if you lose your capacity.
Rule 4 – We only hear of the bad cases about the managing of loss of capacity – do you want to box at SHADOWS?
Rule 5 – Keep your power of attorney and guardianship appointment as flexible as possible – create as much flexibility as possible unless there are reasons not to.
Rule 6 – There are hundreds of YEARS of law that relate to the estate planning process and so we do not need to be too prescriptive about how we want it all to work unless the plan requireS something more specific.
Rule 7 – Estate planning is not set and forget. Don’t try to be too long range. Regularly REVIEW your circumstances and documents. Each year when you do your tax is a good reminder for this incredibly important need.
The 2nd step – intervening if things go wrong
What can go wrong?
Some examples of what can go wrong are:
- not all of the children are appointed, which causes arguments
- children don’t agree on decisions (whether they are appointed or not)
- an attorney or guardian’s personal circumstances change for the worse (e.g. financial hardship or marital breakdown) and they begin to take advantage of their position intentionally or not, e.g. by taking money or moving in with the principal under the guise of providing care and support
- spouses of children and grandchildren are co-appointed together with children and grandchildren and this causes arguments
- children have underlying conflicts between themselves and use their appointment as leverage against their siblings to gain some advantage (actual or perceived)
- the principal may not have had the capacity to make the appointment in the first place but was manipulated into doing it (e.g. by being taken to a lawyer who is not the principal’s usual lawyer). This can be a tricky issue because the loss of capacity usually happens over a period of time and the principal can appear better on some days than on others
Sadly, with our aging population, examples such as these seem to be on the rise.
Once things start to go wrong, the care and quality of life of the principal may suffer and their assets may not be put to the best use to provide for the principal in their old age.
Worse, their assets may be wasted or lost so they can’t be used for the principal’s quality of life at all and eventually will not find their way into the principal’s estate to be distributed as they had intended under their will.
Depending on the complexity and seriousness of what is going on, a family meeting might help, even one chaired by an independent person. Family members should try this themselves as a natural option before seeking outside help.
If there is family conflict, the parties may be irreconcilable, and it is usually too late for the principal to do anything, such as vary or revoke the appointments, because by that stage they have lost capacity, or they may not listen to the causes for concern.
The guardianship division of NCAT has the authority to hear applications to review powers of attorney and guardianship appointments, take into account all the evidence and make appropriate orders to change the existing appointments or make appointments if there was nothing already in place.
The application process is simple and cost-effective, the tribunal hearing is informal and lawyers are normally not allowed to be involved in the hearing.
The tribunal will hear all the evidence and make a decision that it sees as being in the best interests of the principal.
Some examples of orders the tribunal may make are:
- vary the existing power of attorney and guardianship appointments, e.g. by removing one or more of the parties appointed;
- revoke them fully.
Long Saad Woodbridge Lawyers can help you and your clients navigate the system if they or a loved one is faced with the challenges of an attorney or guardian who may not be acting in the best interests of the person who appointed them.
Because each situation is different, we will take the time to listen, identify the issues and then advise on alternative solutions for the circumstances.
Often, people simply want the reassurance that their situation is not uncommon, the challenges are not insurmountable, there are flexible and achievable solutions through an informal process in which their voice will be heard, and they can be involved as much as they want to be.
Disclaimer
The information in this article is general in nature and is not intended as legal advice. You should not do or fail to do anything in reliance on information in it. We do not accept any responsibility for any loss that you suffer if you do. You should seek professional advice before you do anything about the issues set out in this article.
