Tuesday, March 31, 2020

Powers of attorney – statutory v common (people)** law documents

View Legal blogpost 'Powers of attorney – statutory v common (people)** law documents ' by Matthew Burgess

Following the previous two posts a question has been raised about the need to comply with the state-based legislation in each jurisdiction when creating a general power of attorney, as opposed to an enduring power of attorney.

Broadly the position in relation to general powers of attorney is as follows:
  1. Each state has legislation setting out a statutory regime for making a general power of attorney;
  2. In addition to this statutory regime, there is at common law the right to make a power of attorney or otherwise delegate the rights of a principal to an attorney;
  3. Assuming the document creating the attorney appointment is properly crafted, a common law appointment of attorney will generally have more flexibility than a statutory document (which will often be in a standard pro-forma).
Enduring powers of attorney are not able to be made at common law and it is therefore necessary to rely on the statutory regime.

The reason that the common law does not support enduring powers of attorney is because a power of attorney terminates automatically when a principal loses legal capacity.

The common law treats a principal-agent relationship as a personal one. This means an agent has no authority to act on behalf of a principal if the principal themselves can no longer act.

** for the trainspotters, the title here is riffed from Pulp, ‘Common People’. 

Tuesday, March 24, 2020

The time is now** - Start date for an attorney’s powers

View Legal blogpost 'The time is now** - Start date for an attorney’s powers ' by Matthew Burgess

One of the questions that arose following last week’s post, that is often raised in estate planning is the timing for powers of attorney to commence operation.

In particular, often a donor will suggest that an attorney’s powers should not commence until some future date, for example ‘on loss of capacity’.

On a number of levels, perhaps counterintuitively, we usually recommend immediate commencement of attorney powers where permitted by law (typically in relation to financial appointments).

In some instances, powers are prohibited at law from commencing until the donor has lost capacity.

The reasons we recommend this approach include:
  1. The likelihood the documents may need to be used in other scenarios (such as during overseas travel, or during periods of short term, relatively minor incapacity such as routine surgery) – the effectiveness of the document is significantly compromised if only triggered by ‘complete, absolute and permanent mental incapacity’.
  2. Avoiding a debate as to exactly when the document has come into force – particularly in an emergency situation it can significantly undermine the utility of the document if there needs to be an analysis of whether a pre-condition to commencement has in fact been satisfied.
  3. As an easy rule of thumb test as to whether there should be (say) a co-attorney appointed – that is, if there are concerns about the powers starting immediately. This can often be at least partly due to concerns about the skills or trustworthiness of the persons nominated.
  4. There are a number of practical steps that can be taken to guard against inappropriate attorney conduct – for example, placing the original enduring powers of attorney in secured storage so that the attorneys are required to request copies before they can exercise their powers.
  5. Another practical protection is ensuring that the appointed attorneys do not sign to accept their appointment until they need to rely on it - the powers under an enduring power of attorney cannot be used unless the appointed attorney has signed their acceptance.
  6. Practically a further easy work around is appointing one or more additional co-attorneys – typically another family member, friend or trusted adviser to act jointly with the clients’ attorneys. This prevents a single ‘rogue’ attorney from acting inappropriately as all decisions would require two or more attorneys to act together.
  7. If there are still concerns about the attorneys acting inappropriately in light of the above points, the harsh reality is that this says more about the persons being considered than it does about the document commencing immediately – in other words the issue should be addressed by reconsidering who is being appointed to the role.
  8. Indeed, if there remain concerns about the integrity of the nominated attorney acting inappropriately, there may be in fact be wider concerns that need to be addressed – such as the attorney acting inappropriately after the donor has lost capacity or even fraudulently creating documentation to allow themselves to act, regardless of the donor’s intention.
** for the trainspotters, the title here is riffed from Moloko, ‘The Time is Now’.

Tuesday, March 17, 2020

Enduring powers of attorney – a hopefully not (failed) reminder **

View Legal blogpost 'Enduring powers of attorney – a hopefully not (failed) reminder ** ' by Matthew Burgess

While each state has different legislation in relation to enduring powers of attorney, one issue that has come up over the last few days, which is common to the rules in virtually every state, is the ability to appoint different people for financial related matters as compared to personal (or ‘guardianship’) matters.

Previous posts have considered various aspects of an advanced health directive (which is effectively the 3rd main component of the areas where you can appoint someone else to make decisions on your behalf).

Often, it will be the case that the people a client is wanting to entrust with their financial affairs will be different to those they wish to have make decisions in relation to personal healthcare matters.

Providing the documentation is crafted appropriately, there is no legal reason that different people cannot be appointed.

One practical issue that needs to be kept in mind however is that many of the personal health related issues will have at least a partial financial aspect to them.

For example, the decision as to the standard of nursing home care to be provided is ultimately as much a financial decision as it is a personal health care decision.

Unless there are compelling reasons to have different people appointed, therefore our default recommendation is that the same people are nominated in all roles.

** for the trainspotters, the title here is riffed from the New Order song, ‘Senses’.

Tuesday, March 10, 2020

Appointor (and a life of) succession **

View Legal blogpost 'Appointor (and a life of) succession **' by Matthew Burgess

Previous posts (including last week), have considered various aspects of an appointor or principal power under a trust deed.

In almost every estate plan involving a trust, it is necessary to consider the best way to appoint a successor appointor.

Predictably, the starting point in this process was to review the trust deed.

Often, the deed will permit the incumbent appointor to have their successor nominated under the will.

Generally, if available, a nomination under the will is the easiest and most commercially sensitive approach to take.

In other instances, for example, where there may be a challenge to the will, it may in fact be more appropriate to structure the appointor succession in a standalone document that sits outside the will.

Any approach is always subject to the deed, which are consistently inconsistent with the approaches available, for example:
  1. appointment via will;
  2. appointment via enduring power of attorney;
  3. automatic lapsing of the role;
  4. mandated succession embedded into the trust deed;
  5. no appointor or principal role in the first place;
  6. succession nominated by some other party (eg a ‘guardian’ or ‘nominator’);
  7. no provision in the deed at all as to what happens to the role and no rules as to how appointor might appoint a successor; and
  8. some combination of one or more of the above
** for the trainspotters, the title here is riffed from the Morrissey song, ‘My life is an endless succession of people saying goodbye’.

Tuesday, March 3, 2020

Appointor disqualification**

View Legal blogpost 'Appointor disqualification**' by Matthew Burgess

Last week, we had a situation where under the terms of a trust deed, the principal or appointor (ie the person with the right to unilaterally remove the trustee) had become automatically disqualified.

This type of provision is not unusual in a trust deed, however the exact mechanisms by which the disqualification took place were somewhat unique.

In this particular situation, the appointor was disqualified from acting if they left the jurisdiction that the trust was set up in (which was New South Wales).

The issue had never come up before until it was an issue, with the appointor now wanting to exercise its powers to remove the existing trustee; and the trustee wanting to resist their removal.

The trustee challenged the proposed unilateral removal by the appointor on the basis that the trust deed no longer gave the appointor the relevant power because the appointor was living in Victoria.

On a plain reading of the deed, the advice to the trustee was; yes, they were correct, and the appointor had been automatically disqualified.

Therefore, not only could the (former) appointor not remove the trustee, there was likely the ability for the trustee to proceed with a variation to appoint a new (friendly) appointor. An approach assisted by the fact that variations under the deed did not require appointor consent.

The situation is (yet) another reminder that before taking any step in relation to a trust; read the deed.

** for the trainspotters, the title here is riffed from the only song I could find with the word disqualification in it, ‘The Winner’ by Coolio.