Generals and majors (or attorneys and appointors, as the case may be) **

Previous posts have considered the broad limitations to an attorney's powers.

A key related question is whether an attorney can act on behalf of a donor for any principal or appointor role held by a donor under a family trust.

Generally, a well crafted trust deed will expressly address the issue and include a clause along the following lines -

'If the principal suffers the loss of lawful capacity through age, accident, or illness (evidence of which is by certificate of a registered medical practitioner), then the principal is the financial attorney of the principal under a valid enduring power of attorney.'

Where the trust instrument does not address the question, the preferred position appears to be that the principal powers can be exercised by an attorney.

The leading case in this regard is generally seen to be Belfield v Belfield [2012] NSWCA 416 where it was held that an attorney could have exercised the principal’s power under the Deed while the principal was incapacitated. In other words, even in the absence of any express provisions in the trust deed addressing the incapacity of a principal, the principal's powers can be exercised by a validly appointed attorney on their behalf.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, ‘Generals and Majors’ is a song from 1980 by the band XTC, listen hear (sic) –

Divorce** and enduring powers of attorney

Previous posts have considered probably the most high profile case involving a divorce using an enduring power of attorney, that being the decision in Stanford.

The case of McKenzie & McKenzie [2013] FCCA 1013 provides another similar example.

A summary of the facts is as follows:

1. The wife separated from the husband, and around six months later, there was evidence to suggest that she began preparing documentation to apply for a divorce;
2. Around nine months after the initial separation, the wife underwent surgery that ultimately resulted in her losing capacity;
3. Following the loss of capacity, the wife's mother was appointed her legal guardian;
4. Via her role as legal guardian, the wife's mother formally finalised an application for divorce;
5. The court allowed the divorce proceedings to proceed on the application of the mother on the basis that the relationship between her daughter and former son-in-law had broken down irretrievably before the loss of capacity; and
6. The fact that the daughter had not been separated from the husband for 12 months (which is normally required) before she lost capacity was not held to be relevant in the circumstances.

A similar conclusion was reached in the case of Price v Underwood (2009) FLC 93-408 where an urgent application by an attorney for a divorce to be granted (as it evolved, one day for the principal died), waiving the normal waiting period.

Mentioning cases such as Re an Incapable Person D [1983] 2 NSWLR 590, Pavey and Pavey (1976) FLC 90-051, Todd and Todd (No. 2) (1976) FLC 90-008 and Falk and Falk (1977) FLC 90-247, it was confirmed:

1. an enduring attorney can make an application for divorce on behalf of a principal;
2. any such application must be supported by evidence that the marriage has irretrievably broken down;
3. the attorney also needs to be able to show that the principal had the requisite intention to bring the marriage to an end and had lived separately and apart from the spouse for 12 months prior to the filing of the application.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the Nirvana song ‘Serve the servants’.

View hear (sic):

EPAs and SMSFs – Bit like Generals and Majors**

Following recent posts about attorney appointments it is important to also remember the special rules that apply in relation to self-managed superannuation funds (SMSF).

As is well understood, a superannuation fund is an SMSF where all members of the fund are trustees or directors of a corporate trustee – see sections 17A(1) and (2) of the Superannuation Industry (Supervision) Act 1993.

A super fund is also a complying SMSF where an EPA of a member is a trustee or a director for a corporate trustee in place of a member during any period that attorney has an enduring power of attorney (EPA) in respect of a member of the fund who themselves is unable to act (see section 17A(3)(b)(ii)).

In order for section 17A(3) to apply the person seeking to become a trustee or director needs to be appointed under an EPA of the member who cannot act. A general power of attorney will not be sufficient.

Practically, the only way in which an attorney under an EPA can act in the role as trustee for an SMSF is for the existing member to be removed from their role as trustee (or director of the corporate trustee as the case may be), and for the attorney under that member’s EPA to be appointed as the new trustee or director in place of the member.

In addition to satisfying the statutory provisions, the trust deed for the SMSF must also be complied with.

Importantly, the attorney for the member performs their duties as a trustee of the SMSF, or a director of the corporate trustee of the SMSF, pursuant to their appointment to that position, rather than as an attorney or agent for the member.

The Tax Office has detailed their views in this area in Self-Managed Superannuation Funds Ruling SMSFR 2010/2. As usual, if you would like a copy of this ruling please let me know.

** for the trainspotters, the title here is riffed from the XTC song ‘Generals and Majors’.

Don’t wanna be the one?** - Corporate trustee appointing an attorney

Recent posts have considered various aspects of attorney appointments.

Where a company is acting as trustee of a trust, it can appoint an attorney to act on its behalf as trustee of the trust, so long as the:

1. constitution for the company permits attorney appointments; and
2. the trust deed for the trust also contains a power for the trustee company to nominate an attorney.

The attorney appointment document should ideally specifically confirm that the:

1. trustee company has power under the trust deed to appoint an attorney; and
2. company, in its capacity as trustee for the trust, is appointing the attorney in accordance with the power.

** for the trainspotters, the title here is riffed from the Midnight Oil song that has a line mentioning corporate, namely ‘I don’t wanna be the one’.

Looking through (you)** - A sole trustee appointing an attorney

Following recent posts about attorney appointment, it is important to remember that a sole individual trustee of a trust can appoint their attorney/s under an enduring power of attorney to act on their behalf if they are unable to carry out their duties as trustee of the trust.

This approach is subject to the trust deed for the trust allowing this outcome.

An example of the relevant clause a trust deed should contain is as follows:

“The Trustee may authorise any person to act as its attorney to perform any act or exercise any discretion within the Trustee’s power including the power to appoint in turn its own agent, attorney or delegate.The appointment may be in respect of more than one delegate or severally and may include provisions to protect those dealing with the agent, attorney or delegate.”

An example provision that should be added to the enduring power of attorney is as follows:

“Whereas I am currently the sole trustee of ‘[#insert] Trust’ a trust established pursuant to the Deed dated [#insert], pursuant to the Trusts Act [#insert details of the relevant stat based Act] and of every other power and law thereunto enabling in the event of my inability for any reason either temporarily or permanently to carry out my duties as sole trustee, or as one of a number of trustees of the [#insert], then this enduring power of attorney operates and allows the attorneys named in this document to act as my attorneys in respect of my trusteeship of the [#insert].”

** for the trainspotters, the title here is riffed (read carefully) from the Beatles Album ‘Rubber Soul’ (Sole) and the song, ‘I’m looking through you’.

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

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’. 

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

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’.

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

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’.

The continuing saga of how many powers of attorney it takes to create authority

In one of the LinkedIn discussion groups I am a member of, the issue was raised recently about what documents are required when someone has assets or spends time in more than one state around the country.

The issue is particularly prevalent in communities near state borders. However it can potentially arise in any situation. Indeed, the issue can also arise across international borders.

Our view, which seems to align with the general consensus of those regularly advising in this area, is captured succinctly in my earlier post – see How many powers of attorney does it take to create authority?

Interestingly, the post from 2011 flags the ‘ongoing push' to have uniform succession laws across Australia. In the five years that have passed since that post, most would agree no progress at all has been made in this area.

In adopting the approach recommended in the earlier post of preparing a document in each jurisdiction that a person has significant assets or spends significant time, it is generally seen as best practice to include ‘duplication acknowledgement' wording.

Some example base wording in this regard is as follows:

1. For the avoidance of doubt I confirm that I have executed an Instrument Appointing an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] pursuant to the [#insert relevant state act] ('the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian]’) for any matter that requires signing by an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] duly appointed by the laws of [#Insert state eg New South Wales].


2. By this Power of Attorney for personal and health matters ('the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters]) I appoint my Attorneys in respect of any personal or health matter not strictly required to be signed by an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] appointed by the laws of [#Insert state eg New South Wales].


3. To the extent there is any inconsistency or overlap between the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] and the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian], the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction] is to prevail and the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] is to be modified (and its operation suspended to that extent only) for such time as the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] remains in existence.


4. In all other respects the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] shall apply and remain in force.

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