Decision-making using a power of attorney

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 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 parents.

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

However, if you used an Enduring Power of Attorney (EPoA) 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.