As noted in the last edition of the Client Newsletter, there have been significant legislative reforms affecting enduring powers of attorney. These recent reforms aim to protect donors (those persons giving the power), who are usually elderly, from abuses that can occur in the use of such powers. The government has made sweeping changes in this area in an attempt to make donors more aware of the full implications of the powers they are giving and attorneys more accountable in their use.

A power of attorney is a legal document used by a person (the “donor”) to authorise another person (the “attorney” or “donee”) to make decisions on the donor’s behalf and in their best interests. An enduring power of attorney is a power that continues to operate even when the donor becomes unable to terminate or revoke it, e.g. the donor suffers a stroke or becomes incapacitated due to an accident.

The Instruments (Enduring Powers of Attorney) Act 2003 (Vic) (“the Act”), which was passed by Parliament unamended on 21 October 2003, repeals ss114-118 of the Instruments Act 1958, replacing them with a new Part XIA. The new provisions become operational on 1 April 2004. The Act sets out the requirements for making an enduring power of attorney and prescribes new forms to be used and steps to be followed to ensure that the donor (the person giving the power) fully understands its nature and effects. The noteworthy changes in this area are briefly outlined below. It should be noted that existing enduring powers of attorney will not be affected by these changes.

When can an enduring power of attorney be made?
Section 118 of the Act specifically states that a donor may make an enduring power of attorney only if he or she understands its nature and effects. The section outlines various elements relating to the power that need to be understood by the donor. These include the donor’s ability to specify conditions, limit, or provide instructions concerning the use of the power, the effects of the power, and its ability to be revoked.

Further, the Act provides that a witness to the making of an enduring power of attorney should make a written record of the evidence giving rise to their belief that the donor understands these elements.

Formal requirements
An enduring power of attorney must be in the approved written form (new forms and an information pack have recently been released by the Department of Justice). The enduring power of attorney needs to be signed and dated by two adult witnesses in the presence of the donor and each other (in the same way a will is witnessed). Certificates signed by each witness need to be provided, stating that the donor signed the enduring power of attorney freely and voluntarily in the presence of the witness (or that a person signing on behalf of the donor did so at the direction of the donor), and that the donor appeared to have the necessary capacity to make the enduring power of attorney. One of the witnesses must be a person authorised to witness the signing of a statutory declaration.

The enduring power of attorney is only effective once the attorney has accepted the appointment. A statement of acceptance needs to be signed by the attorney giving an undertaking that they will exercise the powers conferred with reasonable diligence, that they will avoid acting where any conflict of interest exists between themselves and the donor, and that they will comply with the provisions of the Act.

Record-keeping by attorneys
Section 125D of the Act requires the attorney to keep and preserve accurate records and accounts of all dealings and transactions made pursuant to the enduring power of attorney. This is an important requirement in the legislation and enables a higher level of accountability in the use of the power that has arguably been absent in the past.

The Act covers other areas associated with enduring powers of attorney, including the powers of the Victorian Civil and Administrative Tribunal (VCAT) to hear and determine applications made concerning them.

The new legislation represents significant change in the area of enduring powers of attorney. Clients considering making an enduring power of attorney, or those who already act as attorneys under existing powers, are advised to consult their solicitors to understand how the new legislation may affect them.

It is hoped that the legislative reforms reduce the risks associated with enduring powers of attorney and restore confidence in the use of this very valuable legal tool.