P
[2019] WASAT 38
•11 JUNE 2019
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: GUARDIANSHIP AND ADMINISTRATION ACT 1990 (WA)
CITATION: P [2019] WASAT 38
MEMBER: MS H LESLIE, MEMBER
HEARD: 20 FEBRUARY 2019
DELIVERED : 11 JUNE 2019
FILE NO/S: GAA 4015 of 2018
P
Represented Person
Catchwords:
Administration - Gifting - Pension gifting rules - Centrelink gifting rules - Fiduciary duties - Public policy underpinning pension schemes
Legislation:
Guardianship and Administration Act 1990 (WA), s 4(2), s 68(1)(c), s 68(1)(d), s 70(1), s 71(5), s 72(3), s 86, Pt 6
Result:
Application partially successful
Category: B
Representation:
Counsel:
| Represented Person | : | In Person |
Solicitors:
| Represented Person | : | N/A |
Case(s) referred to in decision(s):
Nil
REASONS FOR DECISION OF THE TRIBUNAL:
Background
The applicant, P, seeks review under s 86 of the Guardianship and Administration Act 1990 (WA) (GA Act) of that part of the administration order that is in place for the represented person, L, that relates to gifting.
P is L's daughter. She resides in metropolitan Perth and has assisted L over many years. There is evidence before the Tribunal that their relationship is close and caring and that the relationship is supportive. There is no evidence to the contrary. There is confirmatory evidence that L had expressed the view to an independent social worker that P is her next of kin and a wish that P be her guardian and her enduring power of attorney (EPA).
History
On 21 March 2018, on P's application (the original application), the Tribunal appointed P as L's plenary administrator with additional authority to expend up to a total of $750 per annum on gifts to be made on behalf of L (the administration order). The Tribunal also appointed P as L's limited guardian to make decisions in relation to accommodation, supports and services and medical and health care treatment for L. The orders were set for review in five years.
The original application was required because of L's identified mental disability, by reason of which disability L has become severely cognitively impaired and has at times required hospitalisation. The disability is attributed to a combination of a brain tumour, earlyonset frontotemporal dementia and a possible encephalitis.
At the time of the original application, L was identified to have a sister residing in Tasmania and a de facto partner residing with L at L's home in metropolitan Perth. By the time of the first hearing, the couple had separated. At the time of that hearing L was staying with her sister in Tasmania whilst arrangements were put in place through the National Disability Insurance Scheme (NDIS) for her care in Western Australia. P attended the hearing.
An email from L's sister was in evidence that stated:
As the sister of [L], I fully support the Application for Guardianship made by my niece [P].
[L's] best interests will be taken care of by her. [P] is an intelligent young woman and has her Mothers best interests at heart. The past few months have been difficult for both [L] and [P]. [P] has communicated constantly with myself, her mothers care team and Social Worker.
[L] has always spoken of [P] being the person to be responsible for her affairs should her situation change.
Subsequently, L moved into accommodation in Western Australia in which she is supported by Senses Australia.
The application
On 14 December 2018, P made an application for a review of the administration order seeking an adjustment to the gifting authority for certain purposes. By subsequent letter, P amended the adjustments that she was seeking to the order.
The review hearing took place on 20 February 2019 and was attended by both L and P.
The evidence
It is not in dispute that L continues by reason of her mental disabilities to be unable to manage her financial affairs. L agrees with this.
On the basis of the corroborative medical and other information available to the Tribunal, the Tribunal is satisfied that L is a person for whom an administration order could and should be made.
The hearing was attended by both L and P.
L presented as relaxed and comfortable at the hearing and appeared to feel that she could speak freely. She gave evidence that she trusted P to look after her affairs and wanted her to continue to do so. She acknowledged that P is her only child and is the sole beneficiary of her will and that she continued to want everything to go to P after her death.
Travel expenses
L is mobile and the evidence is that, in the potentially limited time that she has left to her, she wishes to travel.
The first aspect of P's review application relates to arrangements for future holidays for L. P wishes firstly to travel to Europe this year and potentially elsewhere at future times if possible. P's application is for her as administrator to have authority to pay the travel costs (flights and accommodation) to allow a carer (potentially P or a paid carer) to travel with L on holiday, firstly to Europe in 2019 and, thereafter, as frequently as her health and budget permits. As appears from the information subsequently set out in these reasons, it appears that L can afford to travel with a carer. The evidence is that the planned trip to Europe, in the nature of a 'grand tour' while L is still well enough, would involve estimated additional carer costs in the order of $15,000.
Estate planning
The second aspect of P's review application relates to what might be regarded as two aspects of lump sum gifting.
L's house has been sold since she moved into care and so L has a bank balance of $310,941. She also has an anticipated Workcover claim of $80,000 and long service leave entitlements of $15,264, that is, a total in liquid cash assets of $406,204. She has a superannunation balance of $234,360. Less specified fees, P calculates L's total assets at $643,187.
P is a trained accountant. She has considered what estate planning might be appropriate to maximise her mother's entitlements over her lifetime.
P's evidence is that L resides in secure accommodation funded by the state under NDIS. She presently receives a full Disability Support Pension (DSP) ($27,355) from the state which meets her rent, her food and 'home' expenses such as mobile phone and toiletries. P projects that additional expenses from L's own funds in the order of $15,000 per year need to be budgeted to allow her mother to live comfortably. These are summarised as 'medical' (HBF, doctor, medication, dentist and glasses), 'entertainment' (arranged outings, shopping, eating out and hairdresser) and 'other' (holidays, extra spending and gifts). It appears that L's existing assets do not diminish her entitlement to a full DSP.
An aged pension is means tested. P's evidence, as a trained accountant, is that, were L a person without a mental disability, the law would allow her to arrange her affairs so that by gifting funds to her testamentary beneficiary in advance of her death, she would be able to preserve her right to a continued full pension from the state during her lifetime.
Her evidence is that Centrelink who pay the pensions for the state have gifting 'rules', that permit a person in L's situation to gift $10,000 per annum to a maximum of $30,000 over five years without any reduction in her DSP which is the pension payable to her up to age 65. P further stated that, by virtue of what she referred to as a 'fiveyear rolling rule' (ts 9, 20 February 2019) it is possible for L to gift a further $200,000 prior to the commencement of the payment of the aged pension without it affecting her entitlement to the full aged pension. Her further evidence is that, without the gifting of the $30,000 in the lead up to turning 65 and the further gifting of another $200,000 prior to 65, L's asset values will exceed what is permitted by the means test on the aged pension and will therefore cause a diminution in pension that she can receive once she turns 65.
P seeks orders from the Tribunal to allow her to do for L in permissible estate planning terms what L would be advised to do by an accountant to maximise her entitlements were she not an incompetent person.
L's evidence to the Tribunal is that since the money will go to P anyway, she is happy for monies to go to P during her lifetime to preserve her pension.
L is presently 59 years of age, turning 60 in September 2019. P has prepared a projection of pension and invested funds based on best estimates of future interest rates, relevant fees, expenses and inflation rates. P calculates that if she is permitted to gift $30,000 over the next five years and then a further $200,000, she will be able to preserve L's entitlement to her full DSP over the next 5 years and to a full aged pension once she turns 65 as the gifting will cause L's asset value to be reduced from a potential $694,044 at 65 to $464,044 at 65, that is, to a level below the level at which aged pensions are affected. If the gifting is not permitted, P estimates that, on current projections, L's aged pension will be reduced to $13,198, that is, to less than half of its current value of $27,355.
She argues that, even allowing for an excess of expenditure over income during the next 5 years of between approximately $9,500 $11,500 and in the following 5 years of between approximately $12,000 $15,000, the projections reflect a remaining credit balance of over $90,000 in superannuation after 10 years which, in P's opinion, is a sufficient buffer for contingencies given L's health advice.
This amount would allow for ongoing supplementation of the pension for expenses at $15,000 per year over a further 6 years (until L is 76) or, if by that time expenses, (for example, for 'other' which includes holidays) could reasonably be reduced, for potentially 10 years (until L is 80) or longer.
Consideration
Section 70(1) of the GA Act provides that an administrator 'shall act according to his opinion of the best interests of the represented person' which expression includes, in the view of this Tribunal, the financial best interests of the person.
Section 68(1) of the GA Act requires the Tribunal to be satisfied that a person to be appointed as administrator:
…
(c)will act in the best interests of the person in respect of whom the application is made, and
(d)is otherwise suitable to act as the administrator of the estate of that person.
which expression, in the view of this Tribunal, would generally exclude a person who has a financial conflict of interest with the represented person.
Section 4(2) of the GA Act provides that the primary concern of the Tribunal shall be the best interests of the represented person or of a person in respect of whom an application is made.
Section 71(5) of the GA Act provides that, in exercising its jurisdiction under Pt 6 of the GA Act (in relation to estate Administration), the Tribunal may take a liberal view of the best interests of the represented person as mentioned in s 4(2), and in particular may, if circumstances so require, empower an administrator to make a payment or enter into a transaction of a kind described in s 72(3) on behalf of the represented person.
Section 72(3) provides that the Tribunal may authorise an administrator under section 71(5) to
(a)make a payment or disposition of a charitable, benevolent or ex gratia nature[;]
On occasions the Tribunal does sanction expenditure by an administrator that benefits third parties. Generally speaking, it has been the Tribunal's view that s 72(3) may be used to allow an administrator, where it is affordable, to use funds to make gifts by the represented person to family members and other persons in appropriate circumstances. Examples are:
(1)the purchase for family and friends of gifts for Christmas, birthdays, engagements, weddings, graduations or other celebratory occasions;
(2)the funding of travel by family members to visit a represented person who is not fit to travel to visit relatives;
(3)to fund the travel expenses of a carer to travel with a represented person who is fit to travel (as P seeks here is in the first aspect of her application);
(4)to meet the needs of a close family member who is without means, for example, critical medical treatment; and
(5)the support of a person previously dependent upon the represented person.
Generally speaking, it has not been the Tribunal's approach to allow this section to be used solely to advance the payment of inheritances.
As to the first aspect of the claim, in the view of the Tribunal, the administrator should have authority to pay the travel costs (flights and accommodation to a maximum of $15,000) for a carer (either P or a paid carer) to travel with L on holiday to Europe in 2019 and, thereafter, as frequently as her health and budget permits.
As to the second aspect of the claim, the gifting sought by P is gifting to P. P acknowledges the conflict of interest that this presents for her as administrator but seeks nonetheless to explain why such a course, given the overall picture, is in L's best interest. She argues that a competent person in L's position would be legally able to arrange her affairs so as to maximise her pension entitlements and to lessen her use of her own funds and resources intervivos so as to maximise the inheritance to her daughter P upon her death.
The Tribunal has little information about L's projected life expectancy. She is 59. She may live a long time. P is not positing a shortened life. She is projecting at least 20 years. The evidence is that L has a brain tumour which is impacting her vision and potentially her brain functioning. She has early onset dementia which has caused her to require supported care.
It appears from the projection document that the gifting proposed by the applicant will involve a $10,000 payment by way of gift between 26 September 2020 and 26 September 2021, a further $10,000 gifting between 26 September 2021 and 26 September 2022 and a further $10,000 gifting between 26 September 2022 and 26 September 2023 and then between 26 September 2023 and 26 September 2024 (the date when L turns 65) a gifting of $200,000.
In the view of the Tribunal, the planned course of gifting envisaged in the second aspect of P's application should not be sanctioned by the Tribunal as being in the best interests of the represented person.
It is an unavoidable truth that to give away $230,000 is to cause financial detriment to L.
To do so on the basis of an expected future benefit to L in the form of an increased fortnightly instalment of aged pension (the increase being roughly $500 - $550 per fortnight) from 65 for an unknown number of fortnights, does not undo the financial detriment of the capital gift.
It is true that:
(1)the gifting would permit a course of action that L wishes, namely to maximise her pension during her lifetime and to maximise her daughter's inheritance;
(2)P has appropriate publicly funded care and sufficient funds over and above the sum involved in the proposed gifting, to be comfortably cared for in suitable accommodation for the rest of her life with suitable allowance being made for travel, holidays, outings and other of the comforts of life during those years when she is still able to enjoy the same.
(3)one view of the situation is that to allow the gifting prevents L being effectively discriminated against financially because of her mental incapacity.
However, matters of public policy must be considered as must P's position as a fiduciary.
The represented person has significant financial resources. She is at present entitled to a full disability support pension which will continue to be paid to her for the next 5 6 years until she turns 65 notwithstanding her resources. At that point, the evidence is that without the action proposed by P, her aged pension entitlement will halve, by reason of her assets.
The Tribunal accepts that state pensions are in place to support those in the community who, by reason of age or disability or infirmity, are unable to support themselves by working and/or have insufficient capital resources to otherwise support themselves. The gifting regimes permitted under such pensions are intended to be in place to allow the recipients of pensions from time to time to use their funds to contribute to the support of family and dependents to whom they may feel a sense of responsibility to a limited degree without falling foul of the rules. The gifting regimes are not intended to permit a deliberate scheme of asset reduction in order to ensure that a person continues to meet the criteria for the payment of a pension. It is no argument to say that P can afford to make the gift because she has state funded care and a state pension. Gifting and means testing rules exist to ensure that state funding is provided as a safety net to those who do not have the resources to look after themselves adequately, not to allow those who can afford to to divest themselves of assets in order to place themselves in a situation where they will qualify for state funding.
Such divesting would be likely considered to be for an improper purpose, may well result in a demand for repayment of some or all of the pension paid and could even in some circumstances attract a prosecution for defrauding the commonwealth.
The gifting that P seeks is unashamedly aimed at reducing substantially L's capital base to bring it down to a level whereby L will qualify for a full pension after turning 65. The effect of such a course will be to advantage P to the tune of $230,000.
As administrator, P is unquestionably in a fiduciary position with respect to the represented person. She may not advantage herself at L's expense. Nor may she by her actions as administrator benefit herself, even if to do so has a 'side effect' that is of apparent financial benefit to P.
In the view of the Tribunal, for reasons of public policy and because of the fiduciary duty that P as administrator owes to the represented person, the gifting to P cannot be permitted. It is not appropriate for an administrator to manipulate the affairs of a represented person to shift the financial costs of caring for the represented person onto the state (that is, onto the taxpayers of the nation) by transferring funds to him or herself, during the represented person's lifetime, albeit with the represented person's agreement and albeit that he or she is the sole beneficiary under the represented person's will.
To do so is to misunderstand both the benevolent and altruistic policy that underpins the aged pension and the fiduciary obligations owed by an administrator.
Suitability
The Tribunal accepts that P took no action regarding these matters prior to seeking approval from the Tribunal. The Tribunal accepts that P, in pursuing these matters, is trying to maximise L's financial entitlements and act to fulfil her wishes. It is noted that the gifting rules referred to by P were not corroborated by independent information or evidence from Centrelink. The Tribunal accepts that P has not attempted to mislead the Tribunal as the letter of the rules. Although mistaken as to her duty and misguided in seeking the gifting that she did, the Tribunal accepts that P's actions were taken bona fide in her mother's best interests and that she continues to manage L's financial affairs appropriately. Her actions are overseen by the Public Trustee. L wishes P to look after her affairs. In the view of the Tribunal she remains a suitable person to act as L's administrator.
Conclusion
In the circumstances, the Tribunal is satisfied that L remains a person who meets the criteria for the making of an administration order and is in need of a plenary administrator. The Tribunal is prepared to allow the amendment to the gifting provisions of the administration order as they relate to the travel expenses of a carer but refuses all other gifting requests.
Orders
The Tribunal declares that the represented person, L is:
(a)unable, by reason of a mental disability, to make reasonable judgments in respect of matters relating to all of her estate; and
(b)in need of an administrator of her estate.
The Tribunal orders:
Administration
The administration order dated 21 March 2018 is amended so that it now reads:
1.P of [street address] is appointed plenary administrator of the represented person's estate with all the powers and duties conferred by the Guardianship and Administration Act 1990 (WA).
2.The administrator is authorised to expend:
(i)Up to a total amount of $750.00 per annum on gifts on behalf of the represented person; and
(ii)Up to $15,000.00 in meeting the travel costs (flights and accommodation) of a carer to accompany the represented person on a trip to Europe in 2019 and, in subsequent years, in meeting the reasonable costs of a carer accompanying the represented person on such other trips as are affordable and which the represented person's declining health permits her to take. (For the absence of doubt, it is accepted that the administrator may occupy the position of carer in all or any of the trips referred to in this order.)
3.The administration order is to be reviewed by 21 March 2023.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS H LESLIE, MEMBER
11 JUNE 2019