Legal Tip 385: Asset Protection and Attorney Risk

An attorney has great powers which they can abuse. The abuse can be intentional or unintentional. This can lead to a loss of assets and they may be unrecoverable.


Example

Homer is a widower now that Marge is dead. His kids are all under 18 so he appoints this mate Barney as his attorney under an enduring power of attorney document because Homer is going in for an operation and wants to make sure there is someone able to act for him if something happens.

Barney is a drunk and a gambler. Homer couldn’t have picked a safer person to give the incredible power of operating his bank accounts to.

Barney hears a tip from a mate who knows a jockey. It’s a sure thing. Barney has no ill intentions, but he just wants to borrow that $100,000 in Homer’s bank account for a few hours. He will double his money and pay back $110,000 so no harm done he thinks.

Barney bets of the horse and it comes in 2nd last and he loses Homer’s $100,000

He checks Homer’s other account, and it has $100,000 in it too. Barney does it again and loses that.

Homer wakes up from his operation and is still in hospital for a few days. He notices Barney is acting strange and logs onto internet banking to find his money gone.

Lucy Homer is in hospital as he has a heart attack.

He can sue Barney to recover this money, but Barney’s sole asset is his beer can collection. It might also be possible to have barney charged, but that won’t bring Homer’s money back. Nothing will (excluding a time machine perhaps).

 

POA is generally limited in many states for real property matters requiring legal advice to effect a POA. You can also give away "rights" through other legal concepts. Trusteeship is one example.

Once saw a clients elderly mother taken advantage of by some "nice neighbours"who sought a (dodgy) solictor to sell her house and steal proceeds. The solictor was found professionally liable and struck off and convicted of crimes and the scumbags served a small time in jail too. All fraudulent. Proceeds were siezed by police from soliictors bank account before further loss. A good example of where injunctions where a good tool for a court to order action that limit further harm. NSW Police did much of the heavy lifting ie not civil. A complex issue limited action to stop the sale being settled since it might still be a valid contract to be sued over and prosecutors office suggested it may expose loss. So they allowed sale to settle and police siezed proceeds and arrested parties on the day.

Katz v Grossman style arrangements. Diamond v Michael Hutchence estate issues....MH had given trust control to his accountant / adviser and the beneficiaries included himself. Other beneficiaries failsed in legal efforts