Continuing Powers Of Attorney For Property - Do's And Don'ts

A continuing power of attorney for property is an estate planning tool that enables a person (i.e., the attorney) to step into the shoes of the grantor when the grantor becomes mentally incapable and to do everything the grantor could lawfully do, except make a will. An attorney for property owes a fiduciary duty to the grantor and must always act in his or her best interests.

This blog will discuss the do's and don'ts for both the grantor when executing a continuing power of attorney for property, and the attorney for property when acting on behalf of a grantor who is mentally incapable.

Do's

1. The grantor should consider appointing one or more substitute attorneys for property, who would act in the place of the primary attorney if he or she is unable or unwilling to act. Otherwise, if there is no substitute named, once the grantor becomes mentally incapable, he or she is no longer able to update their power of attorney document and a court application would have to be made to appoint someone as their guardian of property;
2. If the grantor has assets in more than one jurisdiction, he or she should consider executing a power of attorney for property or equivalent in each jurisdiction which recognizes them to ensure that the power of attorney(s) conforms to the relevant laws of each jurisdiction, and to better ensure that the power of attorney will be recognized, with as much ease as possible;
3. An attorney for property is entitled to receive annual compensation in accordance with the prescribed fee scale, pursuant to section 40 of the Substitute Decisions Act, 1992, S.O. 1992 c. 30 (SDA), unless the power of attorney document expressly provides otherwise. Consideration should be given to making express provisions regarding compensation, including whether the attorney(s) should be compensated and in what amount;
4. An attorney for property shall make the following payments on behalf of the grantor:
   1. Those that are necessary for the grantor's support, education and care;
   2. Those that are necessary for the support, education and care of the grantor's dependants; and,
   3. Those that are necessary to satisfy the grantor's other legal obligations.
5. An attorney for property is required to maintain accounts of all transactions involving the property of the grantor, pursuant to section 32(6) of the SDA. Further, an attorney for property who receives compensation shall "exercise the degree of care, diligence, and skill that a person in the business of managing the property of others is required to exercise," pursuant to section 32(7) of the SDA. Moreover, an attorney who receives compensation is held to a higher standard of care than an attorney who does not receive compensation; and,
6. An attorney for property should always review the grantor's will, as well as any other estate planning documents, and not dispose of property, which is subject to a testamentary gift, unless it is necessary to do so, and in the best interests of the grantor.

Don'ts

7. An attorney for property cannot make a testamentary disposition on behalf of a grantor, such as executing a will; However, as per the cases of Banton v. Banton and Easingwood v. Cockroft, in some circumstances, an attorney may create an alter ego trust on behalf of the grantor, which is not a testamentary disposition as the trust is fully established by the trust documents themselves. Further, the court has held that the alter ego trust should mirror the grantor's will, and reflect the distribution scheme as set out in the will, as related to the capital of the grantor's estate;
8. An attorney for property should generally not add themselves as a joint account holder to the grantor's bank and / or investment account(s). Rather, they should have signing authority on any such account(s), which makes it clear that the account(s) funds continue to be beneficially owned by the grantor;
9. An attorney for property does not have an unrestricted right to make gifts or loans on behalf of the grantor, although pursuant to section 37(3) of the SDA, an attorney may make gifts or loans to a grantor's friends and relatives and may also make charitable gifts. However, as per section 37(4) of the SDA, gifts may only be made if, inter alia, the grantor's property is and will remain sufficient to satisfy payments for the grantor's necessary care and basic living expenses as well as supporting his or her dependants and satisfying his or her legal obligations. Further, gifts or loans to the grantor's friends or relatives may be made only if there is reason to believe that the grantor would make such gifts or loans, if mentally capable; and,
10. An attorney for property shall not disclose information unless legally required to do so or ordered by the court; however, they must disclose information to the grantor, attorney for personal care and the Office of the Public Guardian and Trustee.

Lessons Learned

As shown by the do's and don'ts above, an attorney for property faces significant consequences if they do not act properly, including being personally liable for damages and even held criminally liable for fraud under section 331 of the Criminal Code of Canada, if they fraudulently sell, mortgage, or otherwise dispose of property for a purpose other than that for which he or she was entrusted by the power of attorney document.
It is always best to seek legal advice from an experienced estate lawyer before executing a continuing power of attorney, as well as before acting as a person's attorney for property, especially if that person has become mentally incapable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.