Legal Tip 247: Powers of Attorney and Appointor roles in Trusts

Discussion in 'Legal Issues' started by Terry_w, 23rd Oct, 2019.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney

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    Question: Can someone appointed under the power of attorney exercise the Appointors powers under a discretionary trust?

    Answer: Yes, depending on the circumstances.


    Example

    Bart is the sole appointor under the Simpson Discretionary Trust. Separately Bart appoints Lisa to be his attorney under an enduring Power of Attorney (ePOA) Little thought is given to what powers the attorney should have so Bart signs a standard document which appoints Lisa to act in his place should he lose capacity. Bart doesn’t even think of the trust when he signs this.

    The next day after signing the ePOA Bart is in a skateboard accident and loses capacity.

    Under this example unless there is provision in the trust deed, or a separate deed in which Bart has appointed a backup appointor then it is likely Lisa will step into his shoes and then act as the Appointor. Lisa is Bart’s sister so she is also likely to be a beneficiary of the trust. Since she is now the appointor she could change the trustee to a company in which she is in control, or to herself even, and distribute all the income and capital to herself.


    Bart could wake up from his coma to find that the assets of the trust have been transferred to Lisa or one of Lisa’s relatives and nothing left.


    Bart may want Lisa to control the trust, if so no problem perhaps, but the fact that he didn’t even consider what could happen is disturbing.


    Solution:
    a) consider what could happen if you, as appointor, lost capacity.

    b) What does the deed say?,

    c) do you have an ePOA, if so does it mention appointor roles – it probably should to avoid confusion and legal costs.

    d) Does the ePOA conflict with the trust deed?

    e) Consider legal advice.
     

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