This article originally appeared in the June 2018 edition of Fifty-Five Plus Magazine.
A Power of Attorney for Property is a legal document that grants an individual the authority to make financial decisions on behalf of another individual. If the document is a Continuing Power of Attorney, it takes effect immediately after it is signed, rather than only when the grantor becomes incapable. However, it is most often used by the attorney once a grantor is no longer capable of managing their finances, or when the grantor needs assistance to do so.
For ease, I will refer to the grantor of a power of attorney for property as the “incapable person” in this article, even though the grantor does not always need to be incapable for the power of attorney to take effect.
Unfortunately, far too often an individual will begin acting as an attorney for property without appreciating or fully understanding their obligations under this role. Here are some important tips to keep in mind to avoid breaching your duties as an attorney for property.
Tip 1: Annotate bank statements and keep receipts
All attorneys for property have a duty to account; that is, they may be called upon by a court or other individual who has leave of the Court to account for their financial dealings while acting as an attorney for property.
One of the most difficult and expensive issues to deal with for lawyers and the courts is poor record-keeping, particularly if the attorney has been acting for several years. It is therefore imperative to keep timely records of your transactions as an attorney.
Keep all receipts and copies of cheques, and annotate the incapable person’s bank statements and credit card statements with specific transactions, such as “monthly cash withdrawal for mom’s pocket money” or “transfer to pay dental expenses”. Descriptions provided by the banks are often too vague to be useful two or three years later, when the attorney can no longer recall what that transaction was for, and how it benefitted the incapable person.
Tip 2: Start an Excel spreadsheet
One step further is to start tracking and organizing the transactions into an Excel spreadsheet, or other similar program. If there’s animosity in the family, and you anticipate your conduct as attorney may be subject to questions by other family members at one point, start doing this from the beginning. It will save a lot of time and money later down the road.
Tip 3: Consult with the attorney for personal care
An attorney for property has an obligation to manage the incapable person’s property in a manner that is consistent with decisions for that person’s personal care. If you are acting as an attorney for property and someone else is acting as an incapable person’s attorney for personal care, you should be aware of the care plan for the individual and manage their finances accordingly.
Tip 4: Consult with the incapable person to the extent possible
Capacity is fluid. A person may go in and out of periods of capacity, or they may be capable of making some decisions and not others. To the extent possible, an attorney has an obligation to encourage the incapable person to participate in decisions.
Tip 5: Ascertain the contents of the incapable person’s Will, if there is one
When possible, an attorney has an obligation to preserve the property bequeathed in the incapable person’s Will. It is therefore important to be aware of the individual’s Will contents, and any specific property the incapable person wishes to gift to another individual upon death.
Tip 6: Do not change or try to change the incapable person’s estate planning
As an attorney, you do not have the authority to change the incapable person’s Will or other testamentary dispositions, so don’t even attempt to.
Tip 7: Don’t be Secretive with Family Members
Secrecy breeds suspicion and doubt. Litigation often arises when one or more family members feel the attorney for property is being evasive when they are questioned about their financial management. The perception of wrongdoing often creates just as many issues as any actual wrongdoing. Moreover, an attorney for property has an obligation under the Substitute Decisions Act to consult with the incapable person’s supportive family members and friends who are in regular contact with the incapable person.
Tip 8: Incur legitimate expenditures on behalf of the incapable person
Legitimate expenditures are those reasonably required for the incapable person’s support, education and care, or that of his or her dependants. You must also take into account the value of the person’s assets, and their previous standard of living when determining what is reasonable. The overarching principle is that any expenditures made must be in the incapable person’s best interests, or for their benefit.
Tip 9: If you are claiming compensation, you will be held to a higher standard of care
If you do not take compensation for acting as an attorney, a court expects you to exercise the care, diligence and skill that a person of “ordinary prudence” would exercise in conducting his or her own affairs. However, if you do take compensation, you will be held to the standard that a person in the “business of managing property of others” is required to exercise.
Tip 10: Seek legal advice prior to acting
If your unsure of what your obligations are, speak to a lawyer for advice. Pleading ignorance later will not be an effective defence, and advice up front will be a lot less expensive than the cost of litigation down the road.
For more information on acting as an attorney for property, contact our Wills & Estates Practice Group.