Wills and Estates

Power of attorney: How to assess your client’s mental capacity with care

Drafting a power of attorney provides your client with a plan for when they are unable to make decisions themselves. But it can also be abused to take advantage of people when they’re most vulnerable.

Power of attorney: How to assess your client’s mental capacity with care

It’s crucial that lawyers lead with compassion and clarity throughout the entire process.

So how should you assess your client’s mental capacity when they’re appointing attorney authority?

We spoke with Adeline Schiralli, Consulting Principal at Keypoint Law, who shares the ethical and legal factors needed to navigate the process smoothly.

Power of attorney on the rise

“Powers of attorney are becoming more prevalent in Australia. Our ageing population is a key factor, but other social trends like increased wealth and complex family dynamics are part of the shift too,” says Adeline Schiralli.

(Adeline practices in Sydney, and while the details covered here relate to NSW law, much of the information holds true across Australia.)

A power of attorney is a legal document that allows a person (the principal) to appoint a trusted person (the attorney) to manage their legal and financial affairs.

“When a person is no longer able to make decisions for themselves, a well-drafted and considered enduring power of attorney can be particularly beneficial,” says Adeline.

“It grants peace of mind that someone they trust will pay their bills, manage their assets, and generally step into their shoes regarding their legal and financial affairs.”

What powers does the attorney hold? And what can’t they do?

There are two types of power of attorney.

A general power of attorney is time-limited or used for a particular purpose. For example, a general power of attorney might be used when the principal is overseas so that the attorney can pay their bills. This type is revoked once the principal loses capacity.

The other type is an enduring power of attorney, which continues to be operational if the principal loses capacity. The powers bestowed upon the attorney can begin as soon as the attorney signs the document or once the client becomes incapacitated.

“Generally, an enduring power of attorney comes into effect once the principal is no longer capable of making decisions themselves. It’s often used in estate planning to empower a loved one to make decisions on the person’s behalf.”

Each power of attorney document is unique in outlining what powers the attorney holds. However, the attorney generally does not have the authority to act on behalf of the principal to:

  • Give gifts (financial or otherwise), unless the document specifically allows
  • Benefit the attorney or third parties, unless the document specifically allows
  • Cast a vote in a government election
  • Create or revoke a will
  • Make an affidavit

“It’s worth noting that in NSW, and some other states, a power of attorney does not have the authority to make medical, personal or lifestyle decisions on behalf of the principal. These decisions require the principal to appoint an Enduring Guardian,” adds Adeline.

How to assess mental capacity to avoid abuse

A power of attorney is an extremely powerful document that, unfortunately, can be exploited.

“With no one watching over the attorney’s shoulders on a day-to-day basis, there’s a risk that the powers can be abused. And often, once the abuse is realised, it’s too late to recoup the funds as older people are less likely to pursue civil proceedings against their family,” says Adeline.

If the client is elderly or has an intellectual disability, lawyers need to take particular care to ensure the principal understands exactly what they are doing – and that they’re not being coerced by a family member or friend.

Adeline shares key considerations for lawyers to carefully assess mental capacity and prevent abuse:

  • See the client on their own: The most important part of the entire process is for you to talk with the client alone, away from the influence of others. And only take instructions from the client – not from any third parties who might have a vested interest in the outcome.

  • Use everyday language: Your questions should be open-ended and asked in a language that the client understands. So instead of asking your client “Do you understand?” ask “Can you please explain to me in your own words what a power of attorney is?” And importantly – leave legalese at the door.

  • If in doubt, seek an expert medical opinion: If you have concerns regarding your client’s mental capacity, then seek an expert medical opinion from the client’s GP, or preferably a geriatrician or neuropsychologist. Whilst an expert medical opinion is prudent, it’s up to you to decide whether the client has legal capacity or not to put in place the power – after all, you will be signing the certificate.

  • Take notes to track changes: Make detailed notes of every client meeting. Why? A key warning sign that your client might not have capacity is if they change their instructions between the first and second meeting. Yet remain mindful that capacity loss can be permanent or temporary – they may be good one day and not so good the next.

Navigating the process with your client and their family

How should lawyers help their client through the process?

“In this area of law, being caring and compassionate towards your client is paramount. Often, they have never seen a lawyer and this can be particularly daunting for them.”

While lawyers need to be considerate of the client’s family, they must remain unswayed by external influences.

“Often, the client’s family believes that it is their right or entitlement to be appointed the client’s attorney. But it’s up to the client themselves as to who they trust to appoint.

“So don’t succumb to being influenced by family pressures. Your client is your sole concern.”

And while it may seem counterintuitive, an enduring power of attorney can actually help your client from being taken advantage of in the first place.

“Should the person lose capacity without an enduring power of attorney in place, unreliable people could try to control their affairs. But by supporting your client to appoint an attorney they trust, you are helping them to prevent abuse from occurring when they’re at their most vulnerable,” says Adeline.

Want to become skilled in power of attorney?

The College is running Powers of attorney in practice (NSW) on 15 February 2022.

Facilitated by Katelin Whitley, this live webinar will guide you through key information to understand the processes, complexities, risks and dispute resolution methods surrounding powers of attorney.

Looking for something else? Browse our full range of CPD courses.