In my last article, I discussed some considerations that should go into drafting a Will. Today I would like to talk about considerations for drafting Powers of Attorney and acting as an Attorney.
There are two types of Powers of Attorney -- a Power of Attorney for Property, which is a document that gives another person the right to manage your affairs, including things like managing bank accounts, paying bills, and making sure your home is maintained, and a Power of Attorney for Personal Care, which is a document that gives another person the right to make health care and other personal care decisions when you are incapable, such as the types of treatment you will receive, where you will live, and how often you get your hair done.
Both types of Powers of Attorney provide you with control over who will manage your affairs and make decisions with respect to your well-being once you are no longer able to do so. While they are generally fairly simple documents, they are incredibly important and should not be overlooked.
It is important to have Powers of Attorney for Property and for Personal Care in order to make sure that someone you trust (who is referred to as your Attorney) is looking after you and your property when you are unable to do so. Without a Power of Attorney for Property, your family will have to go through a long and expensive process to obtain the right to look after you and your property, and the person who is appointed might not be who you would have wanted.
In appointing an Attorney, it is important to select someone you trust and who you think will be up to the task. Being an Attorney for Property is a lot of work and includes making difficult decisions, dealing with banks and other service providers, and maintaining excellent records. An Attorney for Personal Care must make difficult decisions with respect to your care, and may have an ongoing relationship with your caregivers. Accordingly, make sure you pick someone who will be able to fill these roles over a long period of time.
Many of my clients are in situations where they either do not have someone who can fill these roles for them, appointing someone would cause family strife, or they do not want to be a burden to their family and friends. In these cases, there are other options available. Trust companies (each of the big banks has one, and there are some smaller private trust companies as well) will act as Attorneys for Property (though not as Attorneys for Personal Care), as will some lawyers and accountants. They will charge a fee, but it should be noted that all Attorneys for Property are entitled to charge a fee and it is often worth it to have a professional who knows what he or she is doing in the role.
Unlike a Power of Attorney for Property, which will often come into effect as soon as it is signed, a Power of Attorney for Personal Care is only effective if you are not able to make the decisions yourself. Much to the consternation of many well-meaning Attorneys for Personal Care, this means that so long as you are able to make the decision yourself, it is your right to do so (even if your Attorney for Personal Care does not agree).
Many of you have aging parents and are currently acting as Attorneys for Property and/or Personal Care. If you are acting in this role, it is important that you have the full picture -- you should review a copy of the Will as you are required to take it into account when making decisions for the Donor; you should also be aware of all bank accounts, credit cards, investments and other property.
The overarching obligation of an Attorney is to act in the best interests of the Donor (the person who granted the Power of Attorney). This means you are responsible for ensuring that funds are spent wisely, that the person is kept comfortable, and that impeccable records are kept. You should be saving receipts and bills and keeping a running document outlining where funds are, what expenses have been paid, and any debts that are outstanding. The Donor (if he or she is capable) or his or her estate can require you to pass your accounts before a Court, which is expensive and time consuming. In order to avoid this, it is important to ensure that you are transparent and organized.
It is also important to keep in mind that an Attorney has an obligation to involve the Donor in decision making as much as possible, taking into account the Donor's capacity.
One of the most difficult decisions that an Attorney can be faced with is where the Donor should live. As noted above, so long as the Donor has capacity, he or she is entitled to make that decision, regardless of whether or not the Attorney thinks it is best. If following the Donor's directions could be unsafe, there are steps that can be taken to get an order requiring the Donor to move, but it is preferable to involve the Donor in these decisions and try to help them understand. Such an order should be a last resort.
Many Attorneys for Property can be frustrated when they present a Power of Attorney for Property to a financial institution that says they "can do on my behalf anything in respect of property that I could do if capable" and the financial institution tells them otherwise. The financial institutions do this because they financial institution have regulatory obligations as well as the obligation not to assist in a breach of trust; accordingly, many financial institutions will not follow instructions that don't appear to be in the best interests of an incapable person, such as putting funds in a joint account.
I will close with a word about joint accounts. Many people consider putting money into a joint account with an adult child, whether for convenience, to avoid probate fees, or because their friends told them it was a good idea. These accounts are generally not "real" joint accounts, in that the money is only meant to be spent on the parent. I don't mean to generalize, but don't do this.
There are of course exceptions, times when the accounts will be used by both parties for their own needs or it is otherwise appropriate to have a joint account, but more often than not putting funds in accounts like this creates more difficulties than it solves. The courts have held that if it is not a "real" joint account, they will generally assume that the funds were given to the adult child in trust for the parent. This complicates matters in many respects, including with financial institutions and, potentially, with respect to avoiding probate fees. It also provides unhappy relatives with an opportunity to challenge the actions of someone who was likely just trying to help his or her aging parent. If you are going to put the funds in a joint account, please consult your lawyer and ensure that what you are doing will achieve the intended result.
Paul Taylor spends his days advising clients on their estates and capacity issues, and he is consistently reminded of how important it is for people to understand what they can and should be doing to look after their estates, and, in many cases, those of their parents. Paul is an associate in the Ottawa office of Borden Ladner Gervais LLP whose practice is focused on estate and trust planning and administration. Paul can be reached at 613.369.4769 or firstname.lastname@example.org.