My friend Moe was appointed an attorney. He took on the role with the attitude – “how hard could it be?” He then asked me where he could find a Power of Attorney for Dummies book. I could not find one. So, in honour of my friend Moe, I wrote this primer on what to do once you have been named as attorney for property.
For those readers like my friend Moe who are only interested in a checklist, please see Appendix “A”. But, for those who want to make sure they do things properly from the outset to pre-empt anyone challenging what they did as an attorney, I invite you to read this blog in full.
First Step – Review the Power of Attorney to Determine Your Powers and Obligations.
The right to act on a power of attorney depends on the type of power of attorney for property (a “POAP”). There may be restrictions and/or events that need to crystalize before the person appointed takes on the duties as attorney for property1.
Continuing POAP2 Triggered on Grantor’s Incapacity
In his text, “Annotated Ontario Estates Statutes”3, Brian Schnurr explains:
“A “continuing” power of attorney is a power of attorney for property that gives the attorney authority to exercise the power of attorney during the grantor’s incapacity to manage property”.
This is also known as an “enduring power of attorney”. There are two ways to determine if your document is a continuing power of attorney.
- First – the document itself might indicate that it’s a continuing power of attorney.
- Second – if the document does not state that it’s a continuing power of attorney, examine the document to see if it indicates the grantor’s/donor’s4 intention. If it’s clear that the grantor/donor wanted the person(s) named as the attorney to have the authority to manage the property during the grantor’s/donor’s incapacity to manage property,5 the document is a continuing power of attorney.
To be clear – that means that from the point in time that the grantor/donor becomes incapable to manage property, the person named as attorney can do everything that the grantor/donor can do with respect to the property, save and except for making a will.6
Postponed effectiveness of POAP – is the right/obligation to act triggered by incapacity?
A person signing a POAP may only want it to take effect when they lose their capacity to manage their property. Others want it to take effect right away. Perhaps they are often out- of- town, or they are so busy in retirement that the named attorney is tasked with watching over the property. It’s important for the person appointed as the attorney for property to review the document and determine if the effectiveness of the POAP is postponed until a specified event or contingency.7 One should also verify whether the continuing power of attorney is subject to any conditions.8 As Brian Schnurr points out in his text, placing such a condition in the power of attorney creates certain problems:
“The practical difficulty faced with this form of continuing power of attorney is that when the attorney presents the power of attorney to demonstrate his or her authority …, the person or institution to whom the power of attorney is presented will require some form of proof that the contingency, e.g. that the donor has become incapable of managing property, has occurred. As a result, this form of continuing power of attorney is not widely used…”.
If the POAP in question is triggered by the grantor’s/donor’s incapacity to manage property, it behooves the person named as the attorney to arrange for the donor/grantor to be assessed by a designated capacity assessor9and have that assessment on file to show it to any person or institution who might question the attorney’s authority.
General Power of Attorney for Property
A non- continuing POAP – sometimes referred to as a general power of attorney10 is different. A general power of attorney for property is sufficient authority for the person appointed to do anything that the grantor/donor can lawfully do, subject to such conditions and restrictions, if any, as are contained therein. These types of powers of attorney for property cannot be used when the grantor/donor becomes mentally incapable of managing their property and are sometimes used when the grantor/donor needs someone to look after their business affairs on a specific transaction or at a specific point in time11
You will only know what type of power of attorney for property exists by reading the document. It is a good idea to show the document to a lawyer who deals with estates and trusts to verify if and when the power of attorney is triggered and whether there are any restrictions, limitations or conditions attached to it.
Second Step – Determine Assets and Liabilities.
For the sake of this discussion, let’s presume you have reviewed the POAP and determined that it has been triggered. Alternatively, assume you have the cooperation of the grantor/donor to assist you in preparation of your anticipated taking over control of the management of the grantor’s/donor’s property. Your next step is to review the financial records of the grantor/donor. You need to take this step for two reasons.
Firstly, at the risk of stating the obvious, you cannot manage property, administer assets, or pay bills unless you know what those assets and liabilities are. Secondly, an attorney is a fiduciary whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.12 That fiduciary duty includes both a common law and legislative duty to keep accounts of all transactions involving the grantor’s/donor’s property.13 How that’s done will be addressed later. But, for now, it’s enough to say that you cannot keep accounts without knowing the assets and liabilities of the grantor/donor at the start of the process.
Now, reviewing the documents the grantor/donor has at home will likely not provide you with a full picture of their assets and liabilities. Here are some suggestions on how to learn about the income, assets and liabilities of the grantor/donor and steps you must take:
- Professional Advisors: Take the time to speak to the grantor’s/donor’s lawyers, accountants, business associates and family to ascertain the grantor’s/donor’s income, assets and liabilities;
- Locate any Reference to Bank Documents. From reviewing a bank account, you not only see the quantum of cash in the account, but you also can learn about income. It’s also important to see whether the grantor/donor was paying his/her bills by cheque. When you review the account, look for automatic withdrawals like lease payments, insurance premiums etc. It is not unusual for there to be an oversight and for those withdrawals to continue even after a policy has been cancelled;
- Computers. Examine the grantor’s/donor’s computer to determine if they are paying bills on line and what their bank accounts may be. Access to the accounts on line will allow you to review historical bank statements, cheques and other valuable information you need to manage the property.
- Passwords. Check the grantor’s /donor’s phone, computer and records for passwords to online banking sites.
- Title Search. Do a title search to determine ownership of the grantor’s/donor’s home and whether it has been used as collateral security for any loan/line of credit. If you suspect there are properties in other locations, but you don’t know the municipal addresses, you might consider doing a title search under the grantor’s/donors name.
- Review the Grantor’s/Donor’s Tax Returns. This should indicate sources of income. If you can locate any T5 tax forms14, T1135 tax forms15, T4 tax forms16, Notices of Assessment or T4A Tax forms,17 you have a good start for determining income. A good checklist of types of income, assets, liabilities etc. can also be gleaned from Form 13, which is the financial statement used in the family law context. The form is available on line.18
- Safety Deposit Box – Do an Inventory.Contact the financial institutions the grantor/donor/ worked with and inquire whether they have a safety deposit box in their name. Show the institution the POAP. If there is a triggering condition, like incapacity, take the capacity assessment with you. Then do an inventory of the safety deposit box. Ensure that someone from the bank accompanies you to do the inventory. This may pre-empt accusations that things went missing from the safety deposit box. It will also assist in preparation of the accounting. But more about that later.
- Retrieve Property Controlled by Others. For you to manage the grantor’s/donor’s property, you should have control and custody of the property. The law provides that anyone who has custody or control of said property must provide the attorney with any information requested about the property and deliver it to the attorney19.
- Is the Donor an American? U.S. law requires its citizens, regardless of where they reside, to file U.S. tax returns. There are also U.S. information reporting requirements. It is beyond the scope of this blog to detail these requirements. Suffice it to say that it is imperative for the attorney of property to make this determination and obtain competent professional advice on how to deal with this issue. As the Canada Revenue Agency succinctly advises, “As a U.S. citizen, no matter where you live, you have to file annual tax returns and other forms, including the Report of Foreign Bank and Financial Accounts (FBAR).” 20
- Legal Proceedings. You should ascertain whether there are any current legal proceedings relating to the property or the grantor/donor.
- Pensions. Verify the existence of pension and other income and receipts and ensure you monitor when those funds are deposited;
- Benefits. Determine the benefits or supplementary income to which the grantor/donor is entitled;
- Investments. Inform yourself of the grantor’s/donor’s investments and monitor and administer same.
- Debts. Collect debts owing to the grantor/donor;
- Bills. Ensure bills are paid and determine when they are regularly due;
- Insurance. Ensure insurance premiums are up-to-date and do not lapse;
- Mortgage. Verify if mortgage exists and make payments; and
- Leases. Maintain or sell the grantor’s/donor’s vehicle and make all related loan or lease payments.
Third Step –Learn the Ten Commandments of being an Attorney for Property
An attorney for property is a fiduciary.21 That means that the attorney for property is standing in a position of trust and is bound by the relationship to conduct himself/herself in a certain way. The attorney for property may be liable for damages resulting from the breach of duty22. With those large responsibilities come certain restrictions and duties. I refer the reader to the Attorney General’s website, which summarizes the legal responsibilities of the Guardian/ Attorney for property23 and section 31 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30. In summary, these provide as follows:
- Thou shalt exercise your duties diligently, with honesty and integrity and in good faith for the incapable person’s benefit.24
- If thy decision shall have an effect on the incapable person’s personal comfort or well-being, thou shalt consider that effect in determining whether the decision is for the incapable person’s benefit.25
- Thou shalt encourage the incapable person to participate, to the best of his or her abilities, in the decisions about the property26.
- Thou shalt consult with supportive family members and friends of the incapable person who are in regular personal contact with the incapable person and the persons from whom the incapable person receives personal care.27
- Thou shalt foster regular personal contact between the incapable person and supportive family members and friends of the incapable person.28
- Thou shalt, in accordance with the regulations, keep accounts of all transactions involving the property.29 A mistake often made is the comingling of the incapable person’s accounts and the attorney for property’s bank accounts. Ensure that you separate the accounts.
- Thou shalt exercise the degree of care, diligence and skill that a person in the business of managing the property of others is required to exercise.30
- Thou shalt act exclusively for the benefit of the incapable person, putting your own interests completely aside.31 To that end, be aware that there is a risk in borrowing or taking a gift from the grantor’s/donor’s money for yourself or your family. Since you have a fiduciary duty to act only in the interests of the incapable person, there is a presumption of undue influence, and you may be called upon in court to show that the incapable person gave you the gift “full, free and informed.” For more information about this topic, I refer the reader to https://www.wagnersidlofsky.com/presents-poas/ 32
- Thou shalt create a management plan outlining the details of the property and thy plans to manage the property. More about this later.
- Thou shalt not dispose of property that is subject to a specific testamentary gift in the incapable person’s will.33
An attorney for property maybe called on to make certain difficult decisions and hard choices. For example, if the grantor/donor can no longer safely reside in their home alone they may have to be relocated to a retirement home. Staying in their home might result in unaffordable expenses for 24 hour nursing care, retrofitting the home to make it handicap-accessible, and monitoring staff. The attorney for property has to assess if the grantor/donor has sufficient liquid assets to meet these expenses having in mind possible future costs of care. If the attorney has to liquidate assets to meet expenses, the attorney has to decide which assets to liquidate. Should the cottage or the grantor’s/donor’s home be sold? Should the RRSP be cashed in with the substantive tax incurred? Or should the attorney cash in the TFSA? One of the factors the attorney has to take into account is the last will and testament of the grantor/donor.
The Substitute Decisions Act, 1992, S.O. 1992, c. 30 requires an attorney for property to determine if the grantor/donor has a will and what the provisions of the will are. The law forbids the attorney from disposing of property that is subject to a specific testamentary gift (this does not include money) unless it is necessary to comply with the attorney duties.34 So, if the grantor’s/donor’s last will and testament left the cottage to Uncle Saul, the attorney for property may be restricted in selling the cottage if there are other assets available to provide for the grantor’s/donor’s needs.
Fifth Step – Develop a Management Plan.
While the authority for an attorney to act stems from the power of attorney document, the authority of a guardian of property is through court appointment. If the incapable person never signed a power of attorney for property any person can apply to court to do the job35. The Substitute Decisions Act, 1992, S.O. 1992, c. 30 36 requires the person applying to be a guardian of property to file a management plan.37 There is no statutory obligation for an attorney of property to prepare a management plan, but it’s a great idea nonetheless.
It behooves the attorney of property to review all of the incapable person’ assets and liabilities. That is the foundation of formulating a plan on how to manage the property and meet the expenses of the grantor’s/donor’s care. Without a plan or budget bad things can happen. The incapable person may be put at risk and the attorney may incur personal liability. The office of the Public Guardian and Trustee has a form that can be accessed on line38. It sets out different types of assets and prompts consideration of how to deal with each asset. The plan does the same thing for liabilities and income. For lawyers reading this blog who are searching for CLE materials on preparation of a management plan we refer the reader to an excellent program that was chaired by Nimali Gamage and Jan Goddard of Goddard Gamage Stephens LLP.39
When making the plan the attorney for property has to keep certain things in mind. The attorney’s job is to perform his duties diligently, honestly with integrity and in good faith for the incapable person’s benefit40. So when making a decision or management plan one always has to ask whether the decision made is in the best interests of the donor/grantor. It is not about being fair to the grantor’s/donor’s family. In discussing the behaviour of certain adult children who were litigating over control of their parents’ assets under the Substitute Decisions Act, Justice Brown said,
Proceedings under the SDA are not designed to enable disputing family members to litigate their mutual hostility in a public court. Guardianship litigation has only one focus – the assessment of the capacity and best interests of the person whose condition is in issue. This court, as the master of its own process and as the body responsible for protecting the interests of the vulnerable identified by the Legislature in the SDA, should not and will not tolerate family factions trying to twist SDA proceedings into arenas in which they can throw darts at each other and squabble over irrelevant side issues”41.
The attorney for property is a fiduciary. As articulated by Professor Waters 42
“It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside.” So, the attorney cannot personally profit from his/her position at the expense of the grantor/donor. The management plan should reflect that intention. It’s all about the needs of the incapable person – not his/her family.”
Notwithstanding the fact that the mission statement of the management plan is the best interests of the donor/grantor the Substitute Decisions Act, 1992, S.O. 1992, c. 30 permits the attorney for property to make gifts and/loans to family members and friends of the donor/grantor under certain circumstances43. A gift or loan may be made to the donor/grantor’s friends and relatives or to charities if there remains enough money to satisfy the needs of the grantor/donor. It may also be made if there is reason to think, based on intentions expressed before the donor/grantor became incapable that he/she would have made these gifts/loans if he/she were capable. One such circumstance is when the grantor’s/donor’s last will and testament bequeaths the asset in question to the intended recipient of the gift.44
When contemplating whether to make any gift or loan from the assets of the grantor/donor remember the restriction set out in section 37(4). Gifts or loans may be made only where the remaining property will remain sufficient to satisfy the requirements reasonably necessary for the donor’s/grantor’s support.
Sixth Step – Record Keeping and setting up methodology for keeping Accounts
Both under the common law and by statute the attorney has an obligation to keep accounts of all transactions involving the property.45 There are documents that the attorney for property will need to use during the course of his/her management of property. It is wise to keep a list of these documents and set aside a safe place to store them. These documents include:
- The original power of attorney for property. It makes sense to obtain a notarial copy to show to people like bank officials or lawyers who require proof about the attorney having the authority to take steps on behalf of the incapable person.
- The original last will and testament (some people have multiple last wills for tax purposes so keep them all).
- Compensation agreement, if any, where the donor/grantor stated what the attorney should be paid for his work.
- Any and all previous court order relating to the management of property.
- Vouchers. These are documents evidencing the transactions taken on behalf of the incapable person. Documents might be cancelled cheques, bank statements, receipts, credit card statements etc.
Our office often is called upon to review the records of people who were appointed as powers of attorney from property. They do not know what they were doing. Often receipts are not kept for purchases made, records are not kept on income received. So when the relatives start pointing fingers accusing the attorney of stealing money that person has some explaining to do46.
There are many honest people of good faith who are just lousy at keeping receipts. To those attorneys who are lousy record keepers I draw your attention to the words of Justice Strathy, “An attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property has not adequately carried out his/her duties and will be held personally liable for the unsubstantiated withdrawals”.47This is the doctrine of adverse inference. For those for those interested in this subject, I refer you to Money Missing? Powers of Attorney, Executors and Adverse Inferences
So let’s talk about what should be done to organize the record keeping from the beginning.
A good start to this conversation is section 32(6) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 which provides that the guardian (this obligation also applies to an attorney for property) shall, in accordance with the regulations, keep accounts of all transactions involving the property. So when creating a methodology of record keeping it might make sense for the attorney to look to the regulations. Why does this make sense? Because when creating a methodology of account keeping the attorney is best advised to have in mind that sometime in the future some disgruntled relative or disappointed beneficiary may apply to court and ask that you present the accounts. The goal is to be able to demonstrate to whoever reviews these records what happened to all the money and assets received and disbursed the attorney’s management of the property.
One way to organize expenditures is to pay all bills from one account and or one credit card. Keep copies of all the cheques used to pay the bills and staple the receipts and copies of the cheques to your financial statements. How long do you have to keep these records? The safest thing to do is to keep all the financial records until the attorney passes his/her accounts or receives a release from the estate of the incapable person once he/she has died.48
My suggestion is that the attorney set up his/her record management to make any ultimate accounting easier to provide in the proper format. I refer the reader to the regulations which set out the Form of how to maintain accounts are to be set up. This can be found on line at Accounts and Records of Attorneys and Guardians, O. Reg. 100/96. Below is my recommended way for you to keep a record that will make the ultimate passing of accounts easier.
A list of all the incapable person’s assets as of the date of the first transaction by the attorney or guardian on the incapable person’s behalf, including real property, money, securities, investments, motor vehicles and other personal property.
So let’s assume that the date of the first transaction by the attorney for property is June 1, 2016. One way to organize your documentation of that list of original assets is to prepare a chart. The Attorney should list all of the assets including things like real estate, cash, GICs, Investment Accounts, insurance policies, public and private securities, investments, motor vehicles and all other personal property.
It could look like this:
|Asset No.||Description||Book Value as of the date of the first transaction||Market Value as of the date of the first transaction in Canadian Funds|
|1||123 Easy Street, Toronto||$125,000||$500,000|
|2||7788 Collins Avenue, Miami Beach Florida||$244,000||$800,000|
|3||TD Bank, Yonge St. Clair Account 456098||$5,000|
|4||TD Bank Yonge St. – US dollar Account 17645 (using Bank of Canada exchange rate as of the date of the first transaction)||$6000|
|5||TD GIC Certificate No. 44467 Due August 1, 2016||$500,000|
|6||1988 Toyota Corolla||1,300|
|Total assets as of the date of the first transaction = $1,812,300.00|
A list of all the incapable person’s liabilities as of the date of the first transaction by the attorney or guardian on the incapable person’s behalf;
This is how you might set it up.
|Liability No.||Description||Outstanding Balance|
|1||Visa Account No.1234556789||$4,256.57|
|2||BMO Master Card No. 10111213||$6,876.42|
|5||TD Line of Credit St. Clair & Yonge||$350,000|
|6||Max Jones, Private loan||$5,000|
|7||Receiver General for Canada – re outstanding personal income taxes||$53,000|
|Total liabilities as of the date of the first transaction = $420,710.99|
An ongoing list of assets acquired and disposed of on behalf of the incapable person, including the date of and reason for the acquisition or disposition and from or to whom the asset is acquired or disposed;
|Item No.||Description of asset acquired or disposed of||Date of acquisition or disposition||From or to whom asset acquired or disposed||Reason for acquisition or disposition|
|1||123 Easy Road, Toronto Ontario||November 15, 2016||Sold to Jane Doe||Grantor relocated to nursing home. No need for residence.|
|2||7788 Collins Avenue, Miami Beach Florida||December 15, 2016||Sold to Marc Zees||Grantor moving to nursing home, no longer needed condo.|
An ongoing list of all money received on behalf of the incapable person, including the amount, date, from whom it was received, the reason for the payment and the particulars of the account into which it was deposited;
For the ease of your record keeping it might make sense to have one account through which all money received on behalf of the incapable person is deposited. It is a mistake to have a joint account with the incapable person where you mix the attorney’s person funds in with the incapable persons. It will open the Attorney up to accusations of wrongfully using the incapable person’s money for the benefit of the attorney.
|Item No.||Date received||From whom Money Received||Reason Money Received||Where Money was deposited||Amount of Money received|
|1||06/15/16||ABC Limited||Disability payment||TD Bank, Yonge & St. Clair Account 123456||$500.00|
|2||06/30/16||CRA||Tax Refund||TD Bank, Yonge & St. Clair Account 123456||$140.24|
|3||06/30/16||Government of Canada – re CPP||pension Income||TD Bank, Yonge & St. Clair Account 123456||$745.83|
|4||06/30/16||Government of Canada – re OAS||pension Income||TD Bank, Yonge & St. Clair Account 123456||$463.39|
|5||July 1, 2016||TD Canada Trust GIC # 65341||Interest Income earned||TD Bank, Yonge & St. Clair Account 123456||$405.63|
An ongoing list of all money paid out on behalf of the incapable person, including the amount, date, purpose of the payment and to whom it was paid
|Item No.||Date||To Whom payment made||Purpose of payment||Amount|
|1||June 15, 2016||Bell Canada||Telephone Charges||$30.46|
|2||July 3, 2016||TD Canada||Monthly account fee||$25.00|
|3||July 3, 2016||TD Visa||Shoppers Drug Mart Expense for Adult Diapers ($25)||$2235|
An ongoing list of all investments made on behalf of the incapable person, including the amount, date, interest rate and type of investment purchased or redeemed;
|Item No.||Date of Purchase||Investment Type||Interest||Book Value|
|1||August 19, 2016||Purchase of 1000 shares of Apple Stock at $56.25 per unit||$56,250.00|
|2||September 21, 2016||29 day GIC||.001||$5,000|
|3||October 24, 2016||Redeem 100 Baidu Share at 178.77 per share||$17,877|
|4||November 21, 2016||Non-redeemable 5 year GIC||2.3%||$250,000|
An ongoing list of liabilities incurred and discharged on behalf of the incapable person, including the date, nature of and reason for the liability being incurred or discharged;
|Item No.||Date liability incurred or discharged||Creditor||Reason for incurring or discharging liability||Amount of liability||Running list of liabilities|
|2||November 15, 2016||TD Bank||First Mortgage discharged when 123 East Road Toronto Sold||$250,000||-$250,000|
|3||December 15, 2016||Bank of America||First Mortgage discharges when 7788 Collins Avenue, Miami Beach Fla sold||$180,000||-70,000|
I recently reread a paper by Kimberly A. Whaley entitled THE POWER OF ATTORNEY: ITS MISUSE, ABUSE AND FRAUD.49 Kim says,
“With an aging population, and increased life expectancy, incapacity is more than ever a part of life. …. Careful, considered and creative planning equally will help to assist in planning protectively to avoid family conflict and, in turn, costly and senseless litigation. .. the public at large, should be alert to the possibility of fraudulently obtained Powers of Attorney and the risk to the vulnerable, elderly, dependant, and incapable.”
Kimberly goes on to quote Justice Cullity’s remarks in Stern v Stern50. His Honour said
“The court should not, I think, close its eyes to the fact that litigation among expectant heirs is no longer deferred as a matter of course until the death of an incapable person. While, in law, the beneficiaries under a will, or an intestacy, of an elderly incapable person obtain no interest in that person’s property until his, or her, death, the reality is that very often their expectant interests can only be defeated by the disappearance, or dissipation, of such property before the death.”
I bring up Kim’s and Justice Cullity’ s comments to underscore that even the best intentioned most well-meaning and honest people who take on the role of attorney need to prepare themselves for being challenged on their accounts. It’s not just about acting in the best interests of the incapable person. It’s also about being able to prove that you acted in the best interests of the incapable person. Given that the attorney for property could be held liable that should motivate the attorney to keep proper records. It should also motivate the attorney to educate himself/herself on what is expected of him/her when managing the accounts. This includes familiarizing themselves with the fiduciary duties under the law, the issues of gifts and an accounting. I trust that this primer is of assistance in that regard.
Originally published at Wagner Sidlofsky LLP