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Written by:

 

Ashley Doidge

Estates Lawyer, Stancer Gossin Rose LLP

 

 

Avoiding Guardianship Litigation with Carefully Considered Powers of Attorney

With Canada’s aging population there has been in increase in disputes within families about who should be making personal and financial decisions on behalf of incapable members of the family.

 

Many of these disputes could be avoided with properly drafted Powers of Attorney.

 

In Ontario, there are two common Powers of Attorney: 1) A Continuing Power of Attorney for Property; and 2) A Power of Attorney for Personal Care.

 

While a Will directs what will happen to your assets after you pass away, Powers of Attorney stipulate who will make decisions about your assets while you are alive, and who will make decisions about your personal care when you are alive but unable to make the decision for yourself. The person(s) who is named is referred to in the documents as the “attorney”.. Note, the attorney does not need to be lawyer, and often is a family member or friend.

 

Without a Power of Attorney for Property, when you become incapable of managing your property, nobody except the Office of the Public Guardian and Trustee will be able to manage your finances unless a court application is commenced. Such court application can be inconvenient and expensive. Needless to say, the person who you would have chosen to do this job for you may not be the person whom the court appoints.

 

Without a Power of Attorney for Personal Care, when you become incapable of making personal care decisions, legislation takes effect which provides a list of potential substitute decision makers in a hierarchy. Note that the list includes the incapable person’s “spouse” or “partner” before the incapable person’s child. Hypothetically, a situation could occur where an incapable person’s boyfriend or girlfriend could have the legal authority to make important personal care decisions instead of the incapable person’s adult children. Alternatively, another hypothetical which could occur if you don’t have a Power of Attorney for Personal Care is that  an estranged relative has the right to make personal care decisions for the incapable person.

 

Summary of Types of Powers of Attorney


Who and How Many Attorneys Should You Name?

 

While it may seem like a straightforward decision to name one child over the other for simplicity, it may be viewed by your other children as a symbol of favouritism. For this reason many clients decide to name all their children. If you name more than one attorney, you can designate whether you want them to act “jointly” or “jointly and severally”. The main advantage of naming attorneys jointly (which requires unanimity) is that there are checks and balances, whereas if the attorneys are named jointly and severally, each of them can technically make decisions on your behalf without consulting the other. The main hurdles with jointly appointed attorneys will be the unavailability of one attorney, inconvenience of requiring all attorneys to make each decision together (which means all the attorneys may need to go to the bank to withdraw funds for example) and the possibility of having a disagreement an even number of attorneys leaving them deadlocked..

 

To proactively deal with these potential issues, we recommend that each client consider either providing a “majority rules clause” in their Powers of Attorney which outlines that a majority of attorneys can act. Alternatively, a client may want to name an additional attorney to act as a tie breaker when there are disputes about managing property.

 

Note if your attorney is a US resident you may want to get legal advice about the following potential complications:

  • Affected status of a Canadian Controlled Private Corporation (CCPC);
  • Canadian brokerage institution insisting that the attorney liquidate the investment portfolio which may give rise to potentially accelerated capital gains;
  • If your attorney has signing authority over a Canadian account they may be required to report annually to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).

 

What to do if you have been named as an Attorney for Property?

 

1) Determine if you want to act as the attorney or if you want to renounce;

2) Meet with a lawyer to obtain advice as to whether your authority is triggered or whether you need to obtain medical evidence to support your authority to act;

 

If you decide that you want to act:

1)  Collect a full list of assets and liabilities of the incapable person;

2)  Obtain legal advice about the duties of attorneys for property;

3)  Obtain a copy of the last will and testament and do not dispose of property that is subject to a specific testamentary gift unless it is necessary to comply with your duties; and

4)  Keep detailed accurate records of your activity and be sure to keep all receipts for expenses.

 

Note to Professionals: Use Caution When Presented with a Power of Attorney for Property

 

If you are presented with a Power of Attorney for Property be sure to:

  • obtain an original or notarized copy;
  • ascertain whether the attorneys are named jointly or jointly and severally;
  • determine whether the Power of Attorney is effective in Ontario;
  • be sure to read the document to see if the grantor provided specific restrictions on the authority of the named attorney;
  • identify the attorney named by taking photo-ID for your file;
  • take reasonable precautions to discover and avoid fraud and determine the authenticity of the document (some case law suggest making inquiries as to whether the donor is alive, had ever revoked the power of attorney or was mentally competent when the power of at attorney was signed);
  • And consider obtaining legal advice.

 

If the grantor is deceased the Power of Attorney document is no longer valid and the attorney loses their ability to manage the assets of the grantor and to give instructions to third parties using the document.