Overview of changes

The Powers of Attorney Act 2014 (Vic) (the Act) came into effect on 1 September 2015. It attempts to consolidate and simplify old provisions that governed enduring powers of attorney and powers of guardianship.

Clients should note that if they have made a power of attorney or power of guardianship under the past scheme, these will not be invalidated. Also, the changes have no effect on medical powers of attorney under the Medical Treatment Act 1988 (Vic).

Enduring powers of attorney

What has changed?

Previously, enduring powers of attorney were executed for financial matters and powers of guardianship would encompass personal matters. There is now no need for two separate documents.  Should a person making a power of attorney (the principal) want different people acting for their personal and financial matters, this can also now be dealt with in the one enduring power of attorney document.

The ability for a principal to appoint more than one attorney is preserved. However, in addition to appointing attorneys jointly and/or severally, the changes enable a principal to appoint multiple attorneys on a ‘majority’ basis. Rather than acting either unanimously or alone, attorneys can make decisions if the majority agree. This is a suitable option for a person who wants to grant their attorneys (e.g. three children) more flexibility when acting.

Greater protection for vulnerable persons

The Act makes it clear that it is an offence for an attorney to dishonestly obtain a financial advantage or cause loss to the principal.  A principal can obtain compensation for a loss caused by the attorney through VCAT and the Act sets out new financial penalties for attorneys who have breached their duties.

Greater risk for persons acting as attorney

The Act imposes new obligations on attorneys and opens them to greater penalties.  It is essential an attorney understands that by accepting appointment they open themselves up to the risk of being sued.

It is common for family members to act as a person’s attorney – usually for no fee!  Often the attorney performs their role in a caring but not entirely professional manner.  For example, transactions may be entered into that benefit both the attorney and the principal (such as shopping) or proper account records might not be kept.  Under the Act, such actions may now give rise to significant penalties.

Creates the role of supportive attorneys

What is a supportive attorney?

The Act introduces the concept of a supportive attorney role. In the past, there have been no legislative provisions within Victoria that allowed for supportive attorneys.

The role of a supportive attorney is to provide assistance to those who require it during the decision making process. So, it would be appropriate for a person to appoint a supportive attorney if they suffer from impairments that affect their decision making capacity.

However, the role of supportive attorney is limited – they cannot make decisions on behalf of the principal.  Also, a care worker, health provider or accommodation provider for the principal cannot act as supportive attorney.

The lesson

Making a power of attorney is much more than down-loading a form.  Principals should be informed of the limitations and conditions they can include in the power of attorney.

Attorneys must be informed of and understand their obligations before accepting appointment and, once acting, put in place mechanisms to avoid or deal with any conflicts that may arise.

If you or your clients wish to execute a power of attorney document or have concerns about the actions of an attorney please contact our experienced team.

Contacts:

Bernie O’Sullivan
Stephen Hardy
Thalia Dardamanis
© Bernie O’Sullivan Lawyers

The 7^th edition of Bernie O’Sullivan’s Estate & Business Succession Planning has just been released.

The book is recommended by universities and professional bodies across Australia including Deakin University, The College of Law, and Kaplan.

At a cost of only $220 it is great value to help individuals, families and business owners get started in their succession planning.

Key features include:

• easy to follow case studies, strategies and diagrams
• discusses pitfalls to be aware of and troubleshooting techniques
• provides a thorough overview of succession planning laws in every jurisdiction
• covers all succession planning topics, including:
  • wills and powers of attorney
  • testamentary trusts
  • blended families
  • protecting vulnerable beneficiaries
  • claims against estates
  • superannuation and superannuation death benefits
  • family trusts
  • international estate planning
  • tax consequences of death
  • family law and death
  • business succession planning
  • charitable trusts
  • special disability trusts
  • aged care

To order a copy click here

© Bernie O’Sullivan Lawyers

Wooster v Morris

The case of Wooster v Morris concerned Mr and Mrs Morris who were individual trustees of an SMSF.  Mr Morris made a binding death benefit nomination (BDBN) nominating his two adult daughters from a previous marriage.  On Mr Morris’ death, his widow took control of the fund and appointed her son from a previous marriage as the co-trustee.  The widow and her son then sought advice from a law firm about the validity of Mr Morris’ BDBN.  On instructions that the BDBN was never delivered by Mr Morris to the widow as the then co-trustee (as required by the deed governing the fund), the firm advised that the nomination was ineffective.  The trustee of the fund was later changed to a company and the widow as the sole director of the corporate trustee resolved to pay Mr Morris’ death benefits to herself.  Mr Morris’ two daughters commenced legal proceedings seeking declarations that the nomination was valid and binding.

The matter was referred to a Special Referee with the consent of the parties.  The Referee found that the BDBN was valid (unfortunately the reasons why it was found to be valid are not mentioned in the judgement) and that the widow had already formed a view on the validity of the BDBN prior to receiving legal advice.  Amongst other things, the Referee recommended that the widow should pay the whole of the daughters’ costs of legal proceedings.  The Court adopted the Referee’s report and held that the BDBN was valid and binding on the then current trustees (the widow and her son) and thereafter on the current corporate trustee.

Consequently, the Court held that the corporate trustee and the widow personally, were jointly and severally liable to pay the daughters Mr Morris’ death benefits plus statutory interest plus the daughters’ costs of (and incidental to) the proceedings.

Lessons to be learned

This case demonstrates that:

• the separate corporate identity of the current trustee did not protect Mrs Morris from personal liability;
• while trustees/trustee directors will generally have a right of indemnity from the trust fund under the terms of the trust deed and the general law, that right can be lost if they act in a manner designed to benefit themselves;
• it is important that trustee directors of SMSFs recognise when they have a conflict of interest (which may be often) and understand their duty of impartiality; and
• trustees should remember they have a right to approach the court for directions, in certain circumstances.

This case is also a reminder that the executor of a deceased member’s Will (the legal personal representative) does not automatically become a trustee (or trustee director) of an SMSF following the member’s death.

Contact us

There are many complexities associated with SMSFs especially when family dynamics come into play.

Our lawyers have extensive experience within this area. If you require advice related to this please contact us.

Contact:

Thalia Dardamanis
Bernie O’Sullivan
© Bernie O’Sullivan Lawyers

What are they?

A Mutual Will is an arrangement whereby two people, typically a couple, agree to make identical Wills and to not change their respective Will without the consent of the other.  After the death of the first of them, the survivor is unable to change their Will.

Why have mutual wills?

Mutual Wills are popular for couples in second marriages and/or blended families.

For example, a couple each have two children from previous marriages.  Both parties have assets in their own name.  On the death of the first of them they want the survivor to inherit the whole estate, because the survivor might live for many years and need the inheritance. On the survivor’s death, the parties agree that the survivor’s estate is to be divided equally between all four children.

Mutual Wills are usually accompanied by agreement or deed that confirms the intention of the parties to be bound by their mutual Will contract.

Potential problems

There are problems with mutual Wills.  For instance, the existence of a mutual will contract does not prevent a person from making a claim for greater provision from the deceased’s estate under family provision legislation.

Also, the surviving party might dispose of, or grant interests in relation to, the property that was the subject of the agreement.

Are there any alternatives?

Clients considering making mutual wills should obtain specialist advice to understand fully the advantages and disadvantages of such arrangements and any alternatives that may be more suitable, such as life interest trust arrangements.

Thinking of mutual wills?

If you are contemplating a mutual will or require advice as to alternatives please contact one of our experienced estate planning team members.

Contact:

Bernie O’Sullivan

Stephen Hardy

Thalia Dardamanis