Lawyer warns on issues arising from attorney conflicts
Considering how the legal principle of conflict will play out for enduring power of attorneys is becoming increasingly important for SMSF estate planning, particularly in light of recent cases, a lawyer has warned.
Cooper Grace Ward leader of commercial workgroup Scott Hay-Bartlem said the basic legal principle of conflict arises where an attorney is meant to act in someone’s best interest but they may choose to do something for their own benefit instead, which disadvantages the person they are meant to be acting for.
Mr Hay-Bartlem said in Queensland case Macintosh vs Macintosh, while it wasn’t about incapacity, highlights the importance of thinking about conflicts and responsibilities of all parties involved in an estate plan.
“An attorney under an enduring power of attorney has responsibilities and duties to the principle, the person they are acting for. This is an area that comes up a lot in estates when the mum has died and the stepfather is doing stuff, or the sister is doing something,” said Mr Hay-Bartlem.
In Macintosh vs Macintosh, he explained, Ms Macintosh had a conflict, and she chose to become the administrator of her late son’s estate, and she went after the super for herself, and not as administrator of the estate.
As an administrator or an executor, Mr Hay-Bartlem said the person involved has a responsibility to deal with the estate, pass it on to the beneficiaries and deal with the estate.
“Now Mrs Macintosh and Mr Macintosh hadn’t talked to each other for many years when their son died so Mr Macintosh wasn’t terribly happy, because the son who was 40-something died with no will and that meant the estate was split 50-50 between the parents, there was no kids, no spouse, half-each,” he said.
“If Mrs Macintosh, the administrator, had pulled the super into the estate, it would be split 50-50, if Mrs Macintosh said ‘I’m in an interdependency relationship, I get the super directly’, she gets 100 per cent, he gets nothing.”
However, the Supreme Queensland Court said as an administrator she had entered a conflict in seeking out the money for herself, said Mr Hay-Bartlem, and as there was a conflict of interest she had to account for the super she received personally to the estate, because of a conflict position.
Mr Hay-Bartlem said there was also a South Australian case recently, Brian vs Carter, that went through the same process.
“In that case Professor Brian died, and his sons and his then partner, Ms Carter had a fight about the super. There were four executors, Ms Carter and her three sons, she went after the super for herself,” he said.
There was a technical difference with this case however, he said.
“There’s a technical difference between executors and administrators, and because in Brian and Carter, the three sons as executors went after the super for the estate, and she went after the super for herself, the court said yes she’s been in a conflict, but because the three sons made an effort to get the super for themselves, and she got it, she didn’t have to account to the estate for it.”
“This is becoming more and more of a live issue, particularly as people squabble about dead people’s estates, or live people’s estates, when they’ve lost capacity,” he said.
“We need to be conscious of when we’re acting as attorneys, to make sure we know in who’s interest we have to act, and how we have to do things.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.