Financial Elder Abuse and Power of Attorney in NSW
- Justeen Dormer
- Feb 28, 2022
- 2 min read
Updated: Mar 23
Will Disputes, Estate Disputes, Estate Planning
Financial elder abuse is a serious issue, often happening when an Enduring Power of Attorney is misused. It's crucial to understand what financial elder abuse is, the role of a Power of Attorney, and the duties involved to protect yourself and your loved ones. This guide explains these key concepts and how to safeguard against abuse.
What is Financial Elder Abuse?
The World Health Organisation defines elder abuse as a single or repeated act, or a failure to act, within a relationship of trust that causes harm or distress to an older person.
This abuse can be financial, emotional, or physical. In the context of wills and estates, financial elder abuse is particularly common.
Financial elder abuse can include:
Misusing or controlling an elderly person’s finances or property.
Coercing or pressuring someone to change their will.
Abusing the powers granted under a Power of Attorney.
Understanding what financial abuse looks like is the first step in protecting yourself or those you care about.
What is a Power of Attorney?
A Power of Attorney (POA) is a legal document where you (the principal) appoint one or more people (the attorney/s) to manage your legal and financial affairs.
There are two main types of Power of Attorney in NSW:
General Power of Attorney: This allows your attorney to act on your behalf only while you have the mental capacity to make your own decisions.
Enduring Power of Attorney: This allows your attorney to continue making decisions for you even after you lose mental capacity. This is where the risk of abuse can be highest.
Duties of a Power of Attorney
An attorney is placed in a significant position of trust and has a legal duty to act in the principal’s best interests. This includes:
Avoiding Conflicts of Interest: The attorney must not put their own interests before the principal's.
Following Instructions: They must obey any conditions and directions set out in the POA document.
Not Profiting from the Role: An attorney cannot benefit from their position unless the POA document specifically allows it.
Abuse occurs when these fundamental duties are breached. Elderly and vulnerable individuals are often the primary targets of financial abuse by a dishonest attorney.
A Real-Life Example of Financial Abuse
The risk of financial abuse was highlighted in the case of Westpac Banking Corporation (Case 662814). An elderly customer appointed her daughter as a signatory and attorney on her bank account.
The daughter attempted to withdraw $100,000 in cash, and a month later, another $800,000. Westpac refused both transactions. The daughter complained to the Australian Financial Complaints Authority (AFCA), but AFCA supported Westpac's decision.
AFCA stated that banks have a duty to exercise reasonable care, especially when a customer is vulnerable. Vulnerable customers include those with age-related impairments who are likely targets of financial abuse.
This case shows how vital it is to choose a trustworthy attorney. It also highlights the responsibility of banks and other financial institutions to protect vulnerable customers from potential abuse.
