Talking trusts: Misconception of enduring power of attorney's.
One common misconception about Enduring Powers of Attorney (EPA's) is that the appointed individual will have the ability to sign trust documents on behalf of the trustees in all scenarios.
However, this is not the case, and attempting to do so can cause some setbacks for the trustees. We have outlined such a scenario below, using the case study of Linda and Peter.
Linda and Peter had been thinking of selling their house for quite a while. The market was buoyant, so it was a good time to sell, and the couple knew that it was time to downsize. Their house was in a trust and had been for a number of years, so they rang the independent trustee to let him know that they were listing the property with an agency.
Completely coincidentally at the same time as putting their house on the market, Linda and Peter were invited to a wedding of a close friend’s daughter in Sydney. They happily accepted the invitation and made plans for their trip. Within two days of putting their house on the market, they had an offer which exceeded their expectations. Delighted, they accepted, signed the agreement, and arranged for their independent trustee to sign as well. The settlement was set down for the week of their trip to Sydney, which worked out fine as they had already decided to move out of the house the week before and stay with their son, Tom, for a while until they found something they really wanted to buy.
Linda and Peter knew there was some paperwork to sign with the lawyer, but they had given Tom power of attorney under an enduring power of attorney relating to property, so knew that he would be able to pop into the lawyer to sign any documents on their behalf. They couldn’t believe it when they got the call in Sydney from a panicked Tom saying that the lawyer told him that he wasn’t able to sign the documents by way of enduring power of attorney.
When Linda and Peter had put in place the enduring powers of attorney, they had naturally assumed that whoever they appointed (in this case their son, Tom) would be able to sign on their behalf as trustees of their trust. This isn’t the case. Trustees are not able to delegate their powers as trustee by way of enduring power of attorney. In fact, trustees can only delegate their powers (i.e. get someone to sign on their behalf if they have signed a deed of delegation and power of attorney which is a different document to the enduring power of attorney document. This can only be used if the trustee is either out of the country or temporarily physically incapacitated (not mentally incapable).
In this instance, Tom was unable to sign the documents for the trust, causing delay and stress for the settlement of the trust’s property.
If you would like to know more information about EPA's or Trusts, please do not hesitate to contact a member of our Trusts team or phone (09) 915 4380.
For further Trust Law advice, get in touch with Tammy and the Trust Law Team.
tammy@davenportslaw.co.nz | 09 883 4420
