What If Power Of Attorney Steals Money

Using a Power of Attorney to steal money

In Estate Planning, you have many ways of protecting yourself and your family. For example, Divorce Protection Trusts and Loans to Children.

However, while you are still alive Enduring POAs and Medical/Lifestyle POAs are the biggest protection.

The person receiving your POA is the donee. The donee is often your spouse and children. But it can be anyone you trust. The donee stands in your shoes. Whatever you can do, the donee can do. They can buy and sell property for you. They can operate your bank accounts.

Obviously, there are limits. For example, the donee cannot make a Will or vote for you.

Can an Australian POA be used against your wishes?

Can the donee use your POA for personal gain? What if this helps you as well? What if your spouse or child taking your money is in your 'best interests'?

While you are of sound mind your attorneys must be directed by you. You remain in control.

An 'enduring' POA has a unique quality. If you become of unsound mind, the POA continues to operate. Your donee continues to stand in your shoes. The donee must now 'guess' what is in your best interest. But now we have a problem. Who is checking what your donee is doing?

How much power does the donee have? Can the donee use the POA for his own personal profit? Is this an abuse of power? Is this elder abuse? Is it legal?

My son is dying. Can I use my wife's POA to save our son?

The husband runs a business. Like all business owners, he has a high risk of bankruptcy. You follow the asset protection strategy of 'man of straw, wife of substance'. Therefore, he puts all his money into his wife's name. But his wife loses mental capacity.

He needs $1m to pay doctors for their terminally ill son. Can the husband use his wife's POA to pay for their son's medical treatment?

Some states including New South Wales, Queensland, Victoria and Tasmania allow the husband to give gifts to relatives. However, all gifts are limited to special events not including medical benefits. Therefore, the husband cannot pay for his son's medical treatment as a gift.

Queensland is the only state that allows the husband (as donee) under a QLD POA to pay for their son's medical treatment. (Some states and territories may allow the spending of the money, but only via court proceedings.)

The husband has no power to draw finances under the Enduring POA for himself or their son for medical treatment. Sadly, the husband must act in good faith. He must only act in his wife's best interest when using her finances. Saving the life of her son is not acting in her best interest. It is acting in her son's best interest.

Can children steal from their parents using a POA?

Your children hold your Enduring POA. Let us say you are of unsound mind. As donees, the children control your finances. Can your children move assets from your name into their names?

You have dementia. Therefore, you lack mental capacity. You need to move into an aged care facility. But in doing so you lose all your money to the government. However, if your children use your POA to put a lot of your assets into their names, then you lose no money. Can the children do this under your POA?

The answer again is no. The children must act in the parent's best interest under the POAs. Stealing their father's assets is of no benefit to their father and is not acting in his best interest.

Buy a Ferrari using mum's POA?

You and your mother dislike each other. You hold her POA. Your mother is of unsound mind and needs medical treatment. She is unable to drive a car. Despite your relationship, you decide to drive her to the hospital. Can you use your mum's POA to buy yourself a Ferrari using her money?

poa elder abuse stealing money using a poa in australia

Driving your mother to the hospital is acting in her best interests. Your mother is receiving benefit from your purchase of the Ferrari. (Obviously, you hold the Ferrari as bare trustee for your mum. After all, it is always her asset.)

A person holding a POA must act in the donor's best interest. Driving your Mum to the hospital is in her best interests. And you need a car. And you may need to get there fast. So a Ferrari may be an acceptable purchase under Mum's POA.

A POA is only used to protect the person that made the POA

So the POA cannot be used to save a child's life and it cannot be used to save tax. But it can be used so that a child can swan around in a Ferrari!

Did the daughter steal $120,000 from her mum?

I want to you consider these facts. I want you to consider what you could have done in your own family to reduce the chance of getting into this mess. Win or lose the daughter and her family suffered by having to go to court.

These are criminal charges (not civil) laid against the daughter.

Daughter risking jail for alleged theft of $120,000 from sick mother

A daughter is accused of stealing $120,000. This from her Alzheimer's-affected mother. The daughter spent thousands of dollars on event tickets, dinners at Crown and jewellery. This is what the District Court was told.

Can you steal money using your parents' Power of Attorney?

Siham Carollisen, 33, is on trial for misusing a Power of Attorney (or more correctly an Admin order). She pleads not guilty to stealing money using the POA.

State prosecutor Mr Ryan Arndt said the money the daughter spent on herself was supposed to be reserved for her mother's living expenses.

"She treated it as if it were her own money," he said.

The daughter transferred her mother's $270,000 share from the sale of the family home to an account in her name.

But this money was almost all gone by June 2015. Mr Arndt said there was "seemingly nothing to show for $270,000".

The Mum gets Alzheimer's.

The daughter argued that her mother gave permission to spend $275,000. This includes the $120,000 she is accused of stealing.

Under cross-examination, the daughter (a mother of two) admits she got massages for herself using Mum's money.

Daughter cleared of stealing $120,000 from mother with Alzheimer's

The decision? The daughter walks free from the District Court. This is after a jury took just 9 minutes to find her not guilty of stealing $120,000 from mum.

She cries when the verdict is read out.

Lessons to learn when holding a POA

The daughter escapes this time. But it put a huge strain on her and her family. POAs and looking after people's money come with huge responsibilities. You have to act in the person's best interest. That is a difficult and subjective burden.

Six ways to protect yourself when holding a POA:

Never put the donor's assets in your own name. This is unless the assets are clearly held by a fully written legally prepared trust or bare trust, and only if the accountant has checked this first.
Get your accountant and financial planner to sign off to say that what you propose is in the Donor's best interest. (E.g. This investment strategy is best because …. You need to sell the family home because it is now subject to CGT and land tax because …)
If you have siblings, get your parents to appoint more than one child to hold the Enduring POA.
Discuss everything you propose to do with all your siblings.
Get your accountant to keep records and a trail of where all the money goes
Don't use any of the money for your personal enjoyment. Pay for your own massages.

28% of POAs built on a government website do not work

You can see the complex nature of POAs. Further, over 28% of POAs are incorrectly drafted and don't work. About 13% of POAs prepared by lawyers do not work. So:

Build your POA on our website.
Speak to your accountant and financial planner before you use a POA to purchase something. This is if the person that gave you the POA is now of unsound mind.

Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
Australia wide law firm

Email: [email protected]

Article written by Adj Professor, Dr Brett Davies and UWA Juris Doctor candidate Adam Cajaglis