How a Power of Attorney & Comprehensive Estate Plan Can Help Avoid Will Disputes

Introduction

A comprehensive estate plan is essential for ensuring your assets are managed according to your wishes and for preventing potential family disputes. While a will is a cornerstone of this plan, it’s important to understand why powers of attorney are a vital part of your comprehensive estate plan, providing security for your financial and legal affairs during your lifetime, especially in the event of illness or incapacity.

A properly established power of attorney can prevent unauthorised asset transfers and protect against financial abuse, which are common catalysts for will disputes after a person’s passing. This guide explains how proactive planning with the help of experienced wills and estate lawyers can safeguard your estate and ensure your intentions are respected, thereby minimising the risk of future litigation.

Power of Attorney: Definition & Purpose

A power of attorney is a legal document that lets you appoint someone to manage your legal and financial affairs if you are unable to do so yourself. This arrangement is essential for ensuring your financial matters are handled according to your wishes during periods of absence, illness, or incapacity.

The difference between general & enduring power of attorney

A general power of attorney is used for specific, short-term tasks and becomes invalid if you lose mental capacity. In contrast, an enduring power of attorney remains valid even if you lose capacity, making it a key tool for long-term planning.

Distinguishing between a power of attorney & guardianship

A power of attorney covers legal and financial decisions only, while enduring guardianship relates to personal and lifestyle choices, such as health care and living arrangements. To cover both areas, you need separate legal documents for each.

How Your Power of Attorney Can Prevent Unauthorised Transfers & Family Disputes

Preventing unauthorised asset transfers by the person in charge

When one person is given a power of attorney to manage an individual’s assets, other beneficiaries can sometimes suspect unauthorised transfers have occurred. For example, if the appointed attorney moves funds from bank accounts, family members may argue that this unfairly reduces the value of the estate.

In cases where suspicious transfers are alleged, forensic accountants can be brought in to review financial records. Their analysis can determine whether money or property was improperly removed from the estate.

A clearly drafted power of attorney helps prevent such situations by:

• Outlining the attorney’s legal duties
• Including the responsibility to keep detailed records
• Requiring the attorney to manage finances transparently

Mitigating accusations of undue influence in estate planning

A will can be challenged and declared invalid if it was created while the person was under duress or subject to undue influence from a friend or family member. If a will is successfully contested on these grounds, a previous version may be used, or the estate will be divided according to intestacy rules.

Establishing a comprehensive estate plan, including an enduring power of attorney, while you have full capacity demonstrates your clear and independent intentions. This proactive step:

• Makes it more difficult for someone to later claim that your will was the result of undue influence
• Shows a consistent pattern of sound decision-making regarding your affairs

Ensuring the principal has capacity to execute the document

For a power of attorney to be legally valid, the principal must have the mental capacity to make their own decisions at the time of signing, a concept related to the grounds used to challenge an invalid will for lack of testamentary capacity. This means they need to fully understand the effect of the document and be exercising their own free judgment when appointing an attorney.

If the principal’s capacity is questionable when the document is executed, its validity can be challenged in the future. A solicitor plays a crucial role in verifying that the principal understands the implications of their decision. This helps ensure the power of attorney can withstand legal scrutiny and prevent future disputes.

Avoiding the need for court appointed financial management

If you become incapacitated without an enduring power of attorney in place, your loved ones cannot automatically step in to manage your financial affairs. Instead, they would need to apply to a court or tribunal to have a guardian or financial manager appointed to make decisions on your behalf.

This process can be both costly and time-consuming. It creates additional stress for your family during an already difficult period. Putting a power of attorney in place is a vital step that ensures someone you trust can manage your affairs immediately, avoiding the need for court intervention.

Appointing the Right Attorney to Make Decisions for Your Estate

Choosing someone you trust to act in your best interests

Selecting the right person to act as your attorney is a significant decision within your estate plan. You are granting them enormous power over your legal and financial affairs, so it is vital to appoint someone you trust completely to act in your best interests and carry out your wishes.

The person you appoint must be over 18 years old and have the capacity to make their own decisions. When making your choice, you should consider individuals who:

• Understand your values and preferences.
• Have the necessary skills to manage your finances, especially if you have complex business or investment arrangements.
• Are willing and have the time to take on the responsibility.

Potential candidates for your power of attorney can include:

• A spouse
• A trusted family member
• A close friend
• A solicitor
• A trustee organisation like the NSW Trustee & Guardian

It is always best to discuss the role with your chosen person and get their consent before formally appointing them.

Deciding between joint & joint & several appointments

You have the option to appoint more than one person to act as your attorney in New South Wales. If you choose to do this, you must specify how they are to make decisions, which can be structured in one of two primary ways:

Appointment Type	Description
Jointly	Requires all appointed attorneys to act together and agree on every decision. If one attorney can no longer act, the appointment of the others may be terminated unless specified otherwise.
Jointly and Severally	Allows attorneys to make decisions either together or independently of each other. This structure provides more flexibility, as one attorney can act without the others if needed.

It is also possible to create a combination of these authorisations. For instance, you could require all attorneys to make decisions jointly for real estate matters but allow them to act severally for managing day-to-day expenses.

Placing conditions & limitations on the authority you grant

When creating a power of attorney, you can place specific conditions and limitations on the authority you give to your attorney. This ensures you maintain control over how your affairs are managed and that the attorney’s power aligns with your specific needs and wishes.

You can restrict your attorney’s power to certain tasks, such as:

• Authorising them only to sell a particular property
• Managing your share portfolio
• Handling your banking and paying bills

You can also impose conditions on how they perform their duties. For example, you might require them to submit financial accounts to a nominated accountant each year for an audit to ensure accountability.

Duties & Limitations of the Attorney You Appoint

The obligation to keep money & property separate

An attorney has a strict legal duty to keep their own money and property completely separate from the principal’s assets, a fiduciary responsibility similar to the duties of an executor of a will. This requirement is a fundamental aspect of the role, designed to prevent the commingling of funds and protect the estate from financial mismanagement.

The only exception to this rule is if you and your attorney are already joint owners of property or operate joint bank accounts together.

Keeping reasonable accounts & records of transactions

To ensure transparency and accountability, the person you appoint as your attorney must:

• Maintain reasonable accounts and accurate records of all transactions made on your behalf.
• Keep a clear history of how your money and property are being managed.

The costs associated with providing and maintaining these records may be recoverable from your funds, which highlights the importance of this duty.

Actions an attorney is strictly prohibited from taking

While a power of attorney grants significant authority, it is not unlimited. There are specific actions that an attorney is legally forbidden from performing on behalf of the principal. These limitations are in place to protect your personal rights and ensure major life decisions remain your own.

An attorney cannot:

Category of Prohibition	Specific Prohibited Actions
Legal & Civic Duties	• Vote in an election on your behalf
• Make or revoke your will
• Consent to breaking the law
Personal & Family Matters	• Make decisions regarding the care or wellbeing of your children
• Consent to a marriage, a sexual relationship, or the dissolution of a marriage
• Enter into a surrogacy arrangement

Why You Should Seek Legal Advice from Wills & Estate Lawyers

The role of a solicitor in verifying capacity & preventing abuse

A solicitor plays a critical role in verifying that the person creating a power of attorney, known as the principal, has the required mental capacity to execute the document. To achieve this, a lawyer will insist on meeting with the principal privately, without other family members present.

This private meeting allows the solicitor to:

• Confirm that the principal fully understands the effect of a power of attorney
• Ensure the principal is exercising their own free judgment

It is a crucial step to ensure the appointment is not the result of undue influence or pressure from someone else. By doing so, solicitors help prevent potential elder abuse.

The importance of updating your will & power of attorney

Your estate planning documents must be reviewed and updated regularly to ensure they reflect your current wishes and circumstances. An outdated will or power of attorney can lead to unintended consequences and may not serve your best interests or those of your loved ones.

It is especially important to update your estate plan after major life events, such as:

• Changes in your relationships, including marriage or divorce
• The birth of children or grandchildren
• Significant shifts in your financial situation

Risks of using DIY kits versus professional legal guidance

While do-it-yourself will kits may seem like a convenient option, they often create significant legal risks. These documents are frequently more susceptible to challenges because they may not be clear about your wishes or may fail to follow the proper legal requirements for a valid will.

Engaging experienced wills and estate lawyers to draft your estate plan provides security and peace of mind. Professionally prepared documents are:

• Carefully drafted to be comprehensive and legally sound
• Designed to minimise the risk of future will disputes and ensure your instructions are carried out correctly

Conclusion

Integrating a power of attorney into your estate planning is a crucial measure for protecting your legacy and maintaining family harmony. This legal document clarifies who you trust to handle your finances, significantly reducing the likelihood of conflicts and challenges to your will down the line.

For trusted expertise in drafting clear and effective estate planning documents, reach out to our dedicated team. Our wills and estate lawyers at PBL Law Group can help you establish a robust power of attorney, providing you with confidence that your affairs are in order.

Frequently Asked Questions