When Good Wives Go Bad: The $1.6 Million Enduring Power of Attorney Disaster Every Estate Planner Must Know

How a widow's "spending spree" with her husband's money became a cautionary tale that's reshaping estate planning advice across Australia

The Perfect Storm of Family Betrayal

Ronald James Smith thought he was doing the right thing. At age 86, with dementia creeping in, he granted his beloved second wife Joyce an enduring power of attorney in January 2008. What happened next reads like a financial thriller except the victims were real, and the damage was devastating.

In just four years, Joyce transformed from dutiful wife to what the NSW Supreme Court would later describe as someone who "rushed headlong into the cash economy," liquidating nearly $1.5 million of her husband's assets while he sat helpless in a nursing home.

The result? A landmark 2017 judgment that every estate planning adviser should have burned into their memory.

When Trust Becomes Betrayal: The Facts That Shocked the Court

The story begins like many tales of blended families. Ronald, 75, married Joyce, 67, in 1997 his second marriage after 52 years with his first wife. His two adult sons from his first marriage watched nervously as their father granted Joyce increasing control over his affairs.

By May 2008, when Ronald's doctor certified he was "no longer able to conduct his financial affairs," Joyce held all the cards. What she did with that power would shock even seasoned legal professionals:

• The Great Share Sell-Off: Joyce liquidated Ronald's entire $952,000 share portfolio in two tranches, claiming it was for nursing home bonds that were never needed

• The Property Shuffle: She sold their jointly-owned home unit for $400,000 and funnelled the proceeds into her daughter's pocket

• The Family Gift Spree: Using Ronald's money, she funded the $347,500 purchase of a house for her daughter and son-in-law, then spent another $200,000 building herself a granny flat on their property

• The Cash Addiction: She withdrew massive amounts in cash, claiming she "kept large amounts at home" for which she could no longer account

When the dust settled, Ronald's estate once worth nearly $1.5 million contained just $75,000.

The Court's  $1.6 Million Judgment

Justice Lindsay didn't mince words. Joyce had "routinely preferred her own interests over those of the deceased" and "generally treated his property as her own." The Court found she had:

• Breached her fiduciary duties as an attorney

• Failed to keep any proper accounts (a cardinal sin that invoked the legal presumption against her)

• Used Ronald's incapacity as a licence to spend his money as she wished

• Deliberately diverted assets to "cut out the plaintiffs"

The Price: Joyce was ordered to pay $1,602,595.81 to Ronald's estate, lost her family home (which was vested in the estate), and was barred from receiving any inheritance until she paid back every penny, which she claimed she couldn't do.

The Five Critical Estate Planning Lessons

1. The Fiduciary Trap People Miss

Once a donor loses capacity, their attorney becomes a strict fiduciary, not a family member with spending privileges. The Court was crystal clear: "Any benefit she might derive from her management of his estate could not, without a breach of duty on her part, be anything more than incidental."

Adviser Action: Explain to clients that enduring powers are protective instruments, not blank cheques for family members.

2. The Gift Authority Gap That Costs Millions

Ronald's 2008 power of attorney deliberately excluded the gift-making powers he'd included in an earlier 2005 version. Joyce ignored this restriction entirely.

Adviser Action: Always review what powers are specifically excluded. If clients want their attorney to make gifts, it must be expressly stated with clear limits.

3. Record-Keeping: The Make-or-Break Factor

Joyce's cavalier approach to records sealed her fate. When attorneys can't account for money, courts invoke the ancient presumption that "presumes the worst against" the defaulting party.

Adviser Action: Build record-keeping requirements into your advice. Suggest regular reporting to other family members or professional oversight.

4. The Blended Family Danger Zone

The Court noted this wasn't "a stable nuclear family" but "a blended family in which different sides are openly in conflict." These dynamics create perfect storms for financial abuse.

Adviser Action: For blended families, consider:

• Co-attorneys from both sides of the family

• Required independent approval for large transactions

• Testamentary trusts that balance spouse provision with children's inheritance and adjustment clauses

• Regular tribunal/court directions where conflicts loom.

5. The "Family Property" Myth That Ruins Estates

Joyce operated under the dangerous belief that marriage created some form of family property entitlement. The Court demolished this notion: "In Australia today there is no legal concept of 'family property' as such."

Adviser Action: Educate clients that marriage doesn't automatically create property sharing rights outside specific statutory schemes.

The Bottom Line

The Smith case reminds us that enduring powers of attorney can become weapons of financial destruction in the wrong hands. For estate planners, it's a masterclass in why careful drafting, ongoing supervision, and sensitivity to blended families aren't just best practices they're essential protection against million-dollar disasters.

 As Justice Lindsay observed, this was "a hard case that has been bitterly fought." Your clients deserve advice that ensures their story doesn't become the next cautionary tale echoing through our courts.

The stakes are clear: Get it right and get involved, or watch families destroy themselves and your professional reputation along with them!