What Happens to Your Finances When You Get Too Sick?
Administering others finances or having someone take care of your own is a difficult decision to make when you are currently well.
You may have organised an Enduring Power of Attorney. This is a document in which you appoint one or more persons to look after your legal and financial affairs if you are unable to do so yourself. If you have already made an Enduring Power of Attorney, your attorney can activate it with any financial institution or government department that you deal with.
This then allows your attorney to stand in your place and make financial decisions on your behalf. However, if you are physically frail but have mental capacity and can communicate your wishes to your attorney, your attorney has no discretion and must carry out your wishes as directed. If your attorney refuses to do so, you can rescind the power.
If you lose mental capacity, your attorney has the right to make decisions on your behalf. So when appointing your attorney, you need to appoint a person whose judgment and honesty you trust. If you have any doubts about a potential attorney e.g. issues with gambling or drugs, do not appoint them. It is wise to appoint more than one person in case one gets sick, moves away or dies.
Just because you have been appointed as an attorney, does not mean your actions cannot be reviewed. If someone believes that an attorney is acting incorrectly, perhaps to enrich themselves, that person can make an application to the Victorian Civil and Administrative Tribunal (VCAT) to have the power reviewed. This could lead to the power being suspended, amended or confirmed.
What happens if you have not made a Power of Attorney?
If you have lost mental capacity, a relative or friend or any interested party may make an application to VCAT seeking an Administration Order. An Administration Order appoints a person to make financial decisions on your behalf. The appointment can be made for 1, 2 or 3 years and is reviewed at the end of each period of appointment.
Whilst the Administration Order works similarly to Enduring Power of Attorney, one difference is that under the Order, you must submit a financial return each year that is audited by State Trustees. Most people know who they would trust to look after their finances but many never get around to making an Enduring Power of Attorney whilst they can. The need for an Enduring Power of Attorney often only becomes apparent after a major decline in health.
Why would you further stress a person who is arranging your health care needs and then at the same time they must prove to a Tribunal that they are a good and proper person to look after your finances? If you have not made an Enduring Power of Attorney, doing so should be a priority for this year. No-one knows what is ahead so planning for all possible eventualities is the best way to assist your loved ones to help you when you need it.
For all enquiries, please contact Mr Grant Mackenzie.
Grant has been a partner at Phillips & Wilkins since 1990 having joined the firm in 1983. He is a member of the Law Institute of Victoria Elder Law Committee. Learn more about Grant's legal experience.