A recent case in the Supreme Court of New South Wales illustrates the strict legal obligations the donor (i.e., the person receiving) of an enduring power of attorney (EPA) must comply with, even where that power is given to a ‘dutiful wife’.
Ronnie Smith’s first marriage produced two surviving adult children (Ronald & Neville). When his first wife died, Ronnie remarried, to Joy. He made a Will and an EPA in January 2008. The EPA was in favour of Joy, and the Will also left her a substantial part of his estate.
Ronnie was certified by a medical practitioner as having lost mental capacity on 13 May 2008. On the same day Joy commenced using the EPA to withdraw funds. Joy cared for Ronnie, but he was eventually placed into care, and died in 2012.
During Ronnie’s period of incapacity, Joy sold his property, mixed it with her own and used it for her own benefit. She used his funds to purchase a property for a daughter of hers from a previous marriage and that daughter’s husband (her son-in-law) and to fund the construction of a granny flat for herself on that property. As Justice Lindsay said:
‘She rushed, headlong, into the cash economy, liquidating all property owned by [Ronnie]…. dissipating [it] as if entitled to do so in disregard of his interests, having entrusted his primary care to a nursing home.’
‘At his expense, she enjoyed holiday cruises with her side of the family, bought an expensive car and expensive jewelry, gambled and enjoyed regular entertainment’.
Ronnie’s children, Ronald & Neville, claimed that Joy owed a fiduciary duty (a duty to act in Ronnie’s best interests) to Ronnie as the donee of his EPA. Joy claimed that she had authority from Ronnie to do as she did. She also claimed that she was not in breach of her fiduciary duties to Ronnie because she had a right to receive spousal maintenance from him. The Court did not accept her arguments. She did have a fiduciary duty to Ronnie. There was no basis for Joy to argue that she was entitled to the assets she had taken during Ronnie’s lifetime because she was to receive these assets under his Will, as the Will only operated after death and not to the extent of the property she had taken from him.
The case demonstrates that, donees of EPAs (even ‘dutiful’ spouses) must be sure to avoid any sense of ‘entitlement’ and ensure that they always place the interests of the donor ahead of their own. Donees of EPAs are held to high standards of behavior whatever their relationship with the donor may be.