Powers of Attorney and blended families: managing risk through smart planning

In modern Australia, blended families are increasingly common, bringing with them complex family dynamics, competing loyalties, and heightened risks of conflict when it comes to estate planning.  Nowhere are these risks more apparent than in the appointment of an Enduring Power of Attorney (EPOA), particularly when the principal’s assets are substantial or there is underlying tension between children from different relationships.

In this blog, we explore the legal risks, structural options, and real-world case studies that highlight why blended families require careful and tailored Powers of Attorney, with proactive strategies to reduce the risk of misuse, conflict, or litigation.

Blended Families and Enduring Powers of Attorney

A Power of Attorney is a legal document that allows one person (the attorney) to make decisions on behalf of another person (the principal) about financial and property matters.  When blended families are involved, such as children from different marriages, stepchildren, or second spouses, it becomes essential to think carefully about who is appointed, how they act, and what safeguards are in place.

The wrong decision can lead to disputes, perceived (or real) misuse of authority, and, in some cases, costly litigation.

Legal Risks Illustrated: Smith v Smith and Dawson v Dawson

🔹 Smith v Smith [2017] NSWSC 408

This case involved a classic blended family dispute in which the deceased had two sons from his first marriage and a second wife, who acted as his enduring attorney during the final years of his dementia. When the deceased lost capacity, his second wife began liquidating his assets and diverting funds towards her own side of the family, including using his money to purchase a property in the names of her daughter and son‑in‑law and paying for cruises, jewelry, and personal expenses. The Court found she had breached her fiduciary duties by treating his assets “as if entitled to deal with it as she wished,” routinely sacrificing his interests to her own agenda (Lindsay J). The judgment confirms that even within a marriage, and even where personal care has been provided, an attorney, particularly a spouse, must act strictly for the principal’s benefit and within the limits of the authority granted.

The case highlights the heightened risk that arises when a parent in a blended family grants an enduring power of attorney to a spouse whose interests may not align with those of children from the first marriage. In Smith v Smith, the Court recognised the clear conflict between the deceased’s children and his second wife, and treated the enduring attorney appointment as a formal fiduciary role, not a licence to rearrange assets in favour of her own family. Much of the attorney’s misconduct occurred after the deceased entered full‑time care, demonstrating how easily financial abuse can occur when one family branch has exclusive control. For blended families, the case reinforces the need for careful selection of attorneys, clear limits on powers, and mechanisms for oversight, particularly where competing loyalties are present and significant assets are at stake.

🔹 Dawson v Dawson [2019] NSWCA 826

The NSW Supreme Court considered allegations of misuse of an Enduring Power of Attorney by a second wife acting on behalf of her husband, who had children from a previous marriage. The principal had granted his wife enduring power over his financial affairs. After he developed dementia, the wife began transferring funds into joint accounts, made large cash withdrawals, and took steps to restructure the estate in a way that reduced the children’s future entitlements. The children from the first marriage challenged these actions, alleging breach of fiduciary duty and failure to act in their father’s best interests. While the Court accepted that the wife had provided genuine care and did not find her conduct amounted to fraud, it noted significant failures to keep adequate records and transparency issues, particularly around co-mingling assets and excluding the children from estate decisions.

This case reinforces the difficulty that blended families face when a spouse is appointed as sole attorney, especially where there is a history of tension between the spouse and children from a previous relationship. Although no intentional wrongdoing was proven in Dawson v Dawson, the Court highlighted that attorneys must maintain strict financial records, act only in the principal’s interest, and avoid creating the perception of unfair advantage. The case illustrates how family members may question or challenge financial decisions, even when caregiving is involved, if they are kept in the dark or suspect exclusion. For blended families, the takeaway is clear: proactive drafting of Powers of Attorney should include transparency mechanisms, reporting obligations, or joint appointments to reduce conflict and future legal scrutiny.

Appointing Attorneys in Blended Families: Joint, Joint & Several, or Alternate?

Joint Appointment

Two or more attorneys must act together on every decision.

Pros:

• Promotes transparency and accountability.
• Prevents unilateral decisions by one potentially self-interested party.

Cons:

• Can lead to deadlock, especially if the attorneys are from different “sides” of the blended family.
• Slows down decision-making and may be impractical for urgent matters.

Best suited for: High-conflict families where oversight is critical.

Joint and Several Appointment

Attorneys can act together or independently.

Pros:

• Allows flexibility and responsiveness.
• Reduces delay where attorneys are in different locations.

Cons:

• Increases risk of one attorney acting without consultation, possibly against the principal’s interests.
• Can create mistrust or resentment between attorneys.

Best suited for: Trusted individuals with aligned interests and good communication.

Alternate Appointment

Only one attorney acts, and others step in if the first becomes unable or unwilling.

Pros:

• Clear hierarchy of control.
• Reduces the likelihood of conflict between active attorneys.

Cons:

• No real-time checks and balances.
• If the first attorney misuses the power, harm may occur before others can step in.

Best suited for: Principals with high trust in one person, and low risk of family conflict.

Drafting Conditions and Limitations to Minimise Risk

When acting for clients in blended families, one of the most powerful tools is customising the Power of Attorney document to limit what attorneys can do—and how they can do it.

Financial and Property Transactions

You can include clauses that:

• Require two signatures for transactions above a certain threshold;
• Prohibit the sale of the principal’s home without written advice from an independent solicitor or accountant;
• Ban dealings with property unless there’s evidence of medical incapacity.

This ensures that major asset decisions aren’t taken lightly—or used to undermine future inheritance planning.

Gifts and Loans

NSW law allows limited gifting under a Power of Attorney (see section 11 and Schedule 3 of the Act) but only in line with the principal’s wishes or customs, and never to the attorney unless clearly permitted.

To avoid abuse, include:

• A clause prohibiting gifts to the attorney or their family;
• A cap on gifts to others (e.g., birthday gifts under $200);
• A requirement that all loans must be documented and disclosed to a nominated accountant or adviser.

Accommodation and Living Arrangements

Attorneys sometimes move family members into the principal’s property, or relocate the principal in ways that disadvantage some beneficiaries.

Consider:

• Requiring that any change in accommodation must be in consultation with a medical practitioner;
• Preventing use of the principal’s property for free accommodation unless previously agreed in writing;
• Ensuring care arrangements are supported by financial analysis, not family preference.

Proactive Strategies to Minimise Attorney Misuse in Blended Families

1. Appoint an Independent Attorney

In high-risk situations, the best strategy may be to appoint a trusted professional such as a solicitor or accountant rather than a family member.

They are more likely to:

• Remain impartial;
• Keep proper records;
• Avoid intra-family conflict.

2. Require Reporting and Oversight

Include clauses that require:

• Regular reporting to a nominated third party;
• Annual financial summaries;
• Retention of receipts for all transactions.

This increases transparency and deters abuse.

3. Keep Estate Planning in Sync

Ensure the Power of Attorney aligns with your Will and any binding death benefit nominations. Mixed messaging can lead to litigation or claims of undue influence.

4. Obtain Legal and Financial Advice

Encourage the principal to receive independent legal and financial advice before signing, and to document their reasons for choosing one attorney over another—particularly if not appointing all children equally.

Conclusion: Don’t Leave It to Chance

In blended families, Powers of Attorney can either prevent conflict or create it, depending on how they’re drafted. The key is to:

• Choose your attorneys wisely;

• Structure the appointment to reflect family dynamics;

• Impose practical safeguards; and

• Seek legal advice tailored to your specific situation.