Understanding financial advice
Financial life goals
Tools and resources
Products and services
Investing with IOOF
Your retirement goals
Understanding super & money
An attorney is a critically important role, so how do you help your client decide who should be appointed?
From an estate planning perspective, the choice of attorney is a ‘must have conversation’ that you can and should have with your client. To demonstrate how important choosing the right attorney is let’s consider scenarios where it can go wrong.
Often clients want to appoint both their spouse and children as attorneys. They could act jointly, but if they can’t agree on a legal or financial decision, no action can be taken. What if one of the children is living overseas? This can make it very difficult to get signatures on documents.
Attorneys can be appointed jointly and ‘severally’- meaning one could act alone without the knowledge or approval of the others. In most situations, there will be a formal arrangement with your client’s bankers to allow one of the parties to be a signatory, but this may not be possible when making decisions about selling shares and other investments. There are many possible problems and difficulties if the appointed attorneys don’t get along or can’t agree on important decisions.
If joint attorneys can’t agree upon a course of action, the matter will invariably end up before the respective State tribunal, such as the Guardianship Board or the Victorian Civil and Administrative Tribunal for a determination. Their usual course of action is to revoke any existing power of attorney and appoint an independent administrator to act in the interests of your client. Potentially, a state-based Public Trustee will be appointed to avoid future conflict. Up until then you would have likely continued to act as the financial adviser for your client, albeit via instructions from the attorney. However, on any appointment of a Public Trustee, your role will cease and your relationship with your client will end. Would your client want this to occur given that you have been their preferred financial adviser for several years? It’s unlikely.
Even if your client prefers to nominate family members as their attorneys, your client can express a clear desire, either in the power of attorney document or some other form of written confirmation, that in the event of any dispute between attorneys and the matter being referred to a State tribunal, an independent professional trustee is to be appointed. It is likely that the tribunal will follow the wishes of your client if they are clearly set out. This is because the tribunal tries to put itself in the shoes of your client and act in their best interests.
Having a partnering arrangement with an independent professional trustee will allow you to continue to provide financial advice on behalf of your client. This may seem to be a self-serving solution but if it is what your client wants and is in their best interests then it should be carried out. It is even more critical when your client operates a business or has other financial structures, such as an SMSF or a family trust.
What if temptation is too great and the attorney abuses their appointment by accessing your client’s money and assets for their own benefit? They certainly won't want you around as the adviser if they have this intention or are already doing it.
Financial abuse is an unfortunate reality that you need to be on the look-out for. It is often not until after your client has died, as part of the estate administration process, that it becomes obvious funds have gone missing. Invariably it is a ‘trusted’ member of the family who acted inappropriately as the attorney. The financial abuse is usually uncovered by other members of the family, or the executor when the funds in the estate don't add up.
In one case, when administering an estate, it was noticed that regular weekly debits of a significant amount were being deducted from a client's bank account over a long period of time. The bank did not realise this was a problem and so they didn’t highlight it. This shows that you can’t rely on banks to detect this type of abuse.
In other cases, ‘loans’ are sometimes made to assist the attorney, with the excuse being ‘it is what Mum would have wanted’. These loans are often not recoverable afterwards. Gambling problems can often lead to this form of abuse.
To reduce the possibility of abuse or if you think there may be family conflict or disputes in relation to your client’s estate then you should advise them to appoint an independent attorney.
Source: Australian Executor Trustees