what happens if someone loses capacity without an enduring power of attorney?
One of the most common estate planning oversights is failing to put an Enduring Power of Attorney (EPOA) in place before it is needed. Once a person loses decision-making capacity, it is too late to make an EPOA because the validity of any legal document requires capacity at the time of signing. If no EPOA exists, the family’s options are more limited, more public, more costly, and more uncertain.
Why the Absence of an EPOA Creates Problems:
A common misconception is that family members or spouses have the inherent ability to manage their family member’s financial and personal affairs however, this is not the case. Without an EPOA, no one has automatic legal authority to access the person’s bank accounts, pay their bills, manage their investments, sell their property, or make decisions about their living arrangements. If a person has lost capacity and there is no automatic person to step in to manage their financial and personal affairs, then it can cause a lot of issues for everyone involved.
Whilst not ideal, there are two options which may be utilised to rectify the situation:
Option 1: APPLYING to VCAT for AN Administration or Guardianship Order
The primary mechanism for obtaining legal authority to manage the affairs of a person who has lost capacity without an EPOA is an application to the Victorian Civil and Administrative Tribunal (VCAT) under the Guardianship and Administration Act 2019 (Vic).
VCAT can make two types of orders:
- Administration Orders – where an administrator is appointed to make financial and legal decisions on behalf of the incapacitated person, including managing bank accounts, investments, property, bills and contracts; and
- Guardianship Orders – where a guardian is appointed to make personal and lifestyle decisions, such as where the person lives, what support they receive, and decisions about medical treatment.
Whether one or both orders are needed depends on the incapacitated persons circumstances. VCAT operates under a presumption that the person has capacity unless medical evidence demonstrates otherwise. Applicants must therefore provide a current and relevant medical report confirming the person’s incapacity, and VCAT must be satisfied that making the order will promote the person’s personal and social wellbeing.
VCAT will only appoint an administrator or guardian if no valid EPOA is in place. If a valid EPOA exists, that document governs and VCAT’s role is supervisory rather than appointive (unless there are concerns surrounding this document).
Who Can Apply to VCAT for Guardianship or Administration?
Any person who has a genuine concern for the welfare of the incapacitated adult can apply to VCAT for a guardianship or administration order. This includes family members, close friends, healthcare providers, and legal professionals acting on the family’s behalf. Where no suitable person is identified or available, VCAT has the power to appoint State Trustees, independent Trustee organisations or the Office of the Public Advocate as administrator or guardian respectively.
What are the key Disadvantages of the VCAT Process?:
Compared to having a valid EPOA in place, the VCAT process has significant drawbacks:
- Delay – the application and hearing process can take weeks or months, during which time the person’s affairs may deteriorate; ;
- Cost – VCAT filing fees, legal fees, and ongoing administrative costs can be substantial;
- Loss of control – the person who is appointed may not be who the incapacitated person would have chosen as VCAT makes the appointment based on what it considers appropriate, not what the person may have wanted;
- Ongoing oversight – unlike an EPOA attorney, a VCAT-appointed administrator is subject to reporting obligations; and
- Family conflict – competing applications for appointment can generate significant family tension and litigation.
Option 2: When the office of the public advocate can step in
Where there is a concern that no family member or close associate is suitable to be appointed, or where elder abuse is suspected, the Office of the Public Advocate (OPA) can be approached to investigate and, if appropriate, act as guardian in the interim or on an ongoing basis. The OPA is Victoria’s independent statutory body responsible for protecting and promoting the rights and interests of people with disabilities, including those who have lost decision-making capacity.
THE KEY LESSON: make your epoa when you still have capacity
The absence of an EPOA transforms what could have been a simple, private and inexpensive arrangement into a formal tribunal process that is slower, more costly, and entirely outside the person’s control. Therefore, the message that we want to convey is simple: make your Enduring Power of Attorney while you still have capacity to do so.
Our Wills, Trusts and Estates team can assist you with all of your Estate planning needs and applications to VCAT for the appointment of an Administrator or Guardian.
