You may have heard in the news recently the NSW Civil and Administrative Tribunal (NCAT) decided that NSW Trustee & Guardian could not require private financial managers to purchase a surety bond, unless ordered by the Supreme Court or the Tribunal. The surety bond scheme was introduced over a year ago and required that private financial managers purchase a form of insurance each year as a form of security in relation to their role as financial manager.
So, what is a private financial manager and how and why would one be appointed to look after your affairs?
If you ever get to the stage where you cannot manage your own financial affairs (which may be, for example, because you are suffering from an age-related illness such as dementia, or it could happen when you are quite young due to a tragic accident) then unless you have made an enduring power of attorney, there will be no-one with authority to handle your financial affairs. As a result, someone in your life will need to make an application to the Guardianship Division of NCAT to have a financial manager appointed to look after your financial affairs. Often this will be a close relative or friend and the appointment is generally made subject to supervision by the NSW Trustee & Guardian. If NCAT considers there isn’t a close family member or friend appropriate to appoint, then NSW Trustee & Guardian may be appointed as the financial manager. NCAT aims to keep the process relatively informal (for example, usually legal representatives will not be involved and the rules of evidence do not apply), but of course, it can still be a daunting process for the person whose financial affairs are in question, as well as for their family and friends.
So how can you avoid this happening to you?
You need to make sure that you have in place an enduring power of attorney, made at a time when you have capacity to make decisions for yourself. The sad reality is that many people leave it too late. None of us want to think about the possibility that we may lose capacity to manage our own affairs and have the attitude that “it will never happen to me”. Unfortunately, it can and it does.
A power of attorney is a very powerful document. You are giving to your attorney the power to look after your financial affairs. They can withdraw money from your bank account, pay your bills, sell assets on your behalf, buy assets on your behalf and also enter into contracts for you. It is of course vital to appoint someone that you can totally trust, because there is the potential for financial abuse if it falls into the wrong hands.
By making a power of attorney whilst you are still healthy and competent to make decisions, you have the ability to appoint someone that you know you can trust to do the right thing. If you wish, you can appoint more than one person. You can also set the parameters of the power by setting out limitations that are to apply to the attorney’s actions.
Without a power of attorney, the decision as to who will be looking after your financial affairs will if you can’t will be out of your hands. You and your family may be faced with the unfortunate situation of having to front up to a tribunal at what will already be a very stressful time.
If you wish to discuss your power of attorney, or any other matters relating to your estate planning, please do not hesitate to contact our estate planning team on (02)4929 3995.