Category: Power of Attorney and Guardianship

A power of attorney is a document which can be utilized to appoint someone you trust with the authority to handle your property or personal care. This is essentially an authorization given in advance that can be general or limited to specific acts that the attorney is allowed to perform on your behalf. You are the authorizing party (also known as the grantor).

A power of attorney for property can be a continuing power of attorney, meaning it is “active” when signed or it can have a term as to when it is to be invoked by the attorney (e.g. upon the grantor being incapable). A power of attorney for personal care is typically only invocable by the attorney upon the grantor’s incapacity.

Responsibilities

The Substitute Decisions Act provides that there are two types of power of attorney in Ontario: property and personal care.

Property

 An attorney for property (who is acting pursuant to a power of attorney for property) is authorized to make decisions regarding the grantor’s property and finances subject to the conditions and restrictions set out in the power of attorney. These decisions range from paying bills, collecting money owed to the grantor and handling investments.

An attorney for property can essentially do anything regarding their client’s property and finances. There are some exceptions we will mention later. The power of attorney can collect debts on the grantor’s behalf, settle their bills, sell assets belonging to the grantor, apply for benefits, access bank accounts and even purchase investments for the grantor such as mutual funds, bonds and stocks.

Exceptions

The attorney for property cannot make or amend a grantor’s will.

The attorney should ensure to not dispose of any property belonging to the grantor that is a testamentary gift made by the grantor.

Personal care

An attorney for personal care is authorized to make decisions related to grantor’s personal care, such as housing, safety, clothing, feeding, hygiene, medical treatment and health care.

If stated in the power of attorney of personal care, this person may have the authority of sharing the grantor’s life support measures wishes to the medical professionals if they are unable to do so.

Duties of an attorney

Sections 32 and 67 of the Substitute Decisions Act provide duties on the attorney for property and personal care respectively. The attorney must exercise the powers and responsibilities diligently and in good faith. The attorney must always act to the benefit of the grantor of the power of attorney. In doing so, the attorney is required to consider the values and beliefs of the grantor when making decisions on behalf of the grantor. An attorney is bound to only carry out the functions authorized by the grantor in the power of attorney and by law.

Property 

The attorney for property must exercise care and skill of a prudent person when handling their responsibilities. This duty is of significant priority for an attorney handling the financial affairs of a grantor. The attorney must make necessary and essential payments for the health-care support and personal care needs of the grantor as well as that of any legal dependants of the grantor.

The attorney should locate the original will of the grantor to ascertain the property of the grantor that can be disposed of without violating the testamentary gifts. The attorney is permitted to dispose of the property of the grantor in order to comply with her duties as an attorney.

Keep proper records

The attorney must keep proper records of all transactions carried out while diligently managing the financial assets, investments and accounts of the grantor. They must make the records available for inspection at the request of the grantor or the court.

Not dispose of property

The attorney must also ensure that the properties of the grantor are secured and not disposed of unless it is the express wish of the grantor or is necessary to comply with the duties of the attorney.

Maintain family relationships

The attorney should also ensure that the grantor’s close family and friends are not estranged from the grantor. It would be expected that the attorney will maintain the good relationship the grantor has with close family and friends. They are also expected to consult with the close family, friends and persons who provide personal care to the grantor on issues relating to care.

Duty to consult

The attorney should try to foster the independence of the grantor as far as possible. They are obligated to encourage the grantor to be involved in any decision-making where possible as it affects the grantor.

A power of attorney does not oust the complete independence and decision-making capabilities of a grantor, provided the grantor can still reasonably appreciate the decisions and consequences.

Big decision

 Due to the wide scope of powers and responsibilities afforded to an attorney, it is not an appointment to be made on a whim. Clients are advised to take into consideration the duties listed above before making a power of attorney to avoid an incompetent or negligent person exercising such significant powers on their behalf.

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Amending an incapable persons management plan 101

As wills, trusts and estates practitioners, it is important to understand the procedure of Guardianship Applications. It is crucial that these applications be completed correctly and that the client understands their duties.

What is guardianship?

When a person is mentally incapable of making decisions relating to their personal care or property, they will require a substitute decision maker to make choices on their behalf. A power of attorney is the typical way in which someone can designate another person to make decisions on their behalf. However, this can only be granted when the grantor is capable.

What happens when someone becomes incapable before the execution of a power of attorney?

 A guardian is appointed by the court or Public Guardian and Trustee (PGT) on behalf of a mentally incapable person to make decisions on the mentally incapable person’s behalf. In order to be appointed, the prospective guardian must file an application. A guardianship for property application requires a notice of application,  an affidavit, a management plan and a finding of incapacity. The notice, like any other notice in litigation,  will provide the overview  of the  relief sought and the  grounds for same. The affidavit will include the  evidence that a prospective guardian will rely on in their application for guardianship. The affidavit will usually include the management plan and proof of a finding of incapacity such as a capacity assessment – the finding of incapacity is required in all guardianship applications. If the person is capable, then they do not require a guardian and could simply execute a power of attorney.

A management plan is the applicant’s proposed plan for the management of an incapable person’s property. The section that an applicant will typically find the hardest to fill out is section L, which are the expenses of the incapable person. These expenses need to be estimated for the needs of an incapable person for the entirety of their guardianship, which is difficult as circumstances may change. The plan  must  be followed  by  the  guardian.  If  the  guardian does not  follow  the  plan, there is risk the Office of the Children’s  Lawyer  (OCL)  or  the  PGT will object to their next passing of accounts. A passing of accounts is a court audit of the incapable  person’s accounts. The guardian must prepare their accounting of all the funds that flowed in and out of the incapable person’s account for the review of the PGT/OCL and judge.

Amending a management plan

 For some unforeseen circumstances as listed below, a lawyer may have to amend the management plan for their clients. Common circumstances for the amendment of a minor’s management plan include, but are not limited to:

• the receipt of monetary damages or settlements pursuant to a court order;
• monies payable to a minor in an estate; and
• the child has been named as a named beneficiary under policies such as a life insurance policy, RRSP or death

Common reasons to amend a management plan for incapable adults include, but are not limited to:

• proceeds or settlements from personal injury matters; and
• sale of a house.

Lawyers must pay special attention to the different procedural and service requirements for minors under the Children’s Law Reform Act (CLRA) compared to incapable adults under the Substitute Decisions Act (SDA).

Amending a management plan for minors

 The powers and obligations of a guardian of property for a minor are contained in the CLRA. The CLRA does not authorize an amendment to a management plan for a guardian of property except by court order, as the court has the statutory power to approve amendments to a management plan for minors. The guardian of property must bring a motion to amend the management plan by filing a Notice of Motion. The Notice of Motion must be served to the OCL.

Amending a management plan for incapable adults

 Section 38(11) of the SDA provides the PGT with the statutory authority to approve amendments of a management plan.

To amend a management plan, an applicant would be required to submit an application to the PGT’s office. In practice, the PGT would respond with a letter of acknowledgement upon receipt of the material. The PGT would review the material and submit a reply to the applicant and to court with comments on the application. Comments may include inquiries related to future accounting, financial management of the property, or the guardian’s compensation. Generally, this process would take a couple of months.

If the request was not approved, an applicant may apply for  direction from the court under s. 39 of the SDA on notice to the PGT for court approval of the amended management plan. An amended management plan need only be served to the PGT.

It is important that the guardian for property understand their duties and it is imperative that the management plan is followed. If guardians cannot follow their own proposed  budget, there will likely be repercussions in the form of the OCL/PGT (depending on the age of the incapable person) or a family member objecting to their accounts in their application to pass accounts. If the guardian is not following the plan and is not acting as a fiduciary, the court may remove them as guardian and/or seek for them to repay any costs they are deemed to have taken improperly (with interest).

Ultimately, when a guardian fails to fulfil their duties, it is the incapable person  who suffers. Clients need to understand the significance of their responsibilities and it is our job as their lawyers to inform them.

Overprotected: Section 3 Counsel & Britney Spears

On July 14, 2021, Britney Spears was granted the right to hire her own lawyer to free herself from her conservatorship. The Ontario equivalent is a “‘guardianship” not “conservatorship”. You can read more about the differences between a guardianship and conservatorship here.

Previously, Spears had a court appointed lawyer, Samuel D. Ingham III. We do things differently in Ontario, but you could say that Britney’s court appointed lawyer is similar to what we have here called “section 3 counsel” per the Substitute Decisions Act (SDA) 1992, S.O. 1992, c.30 (s.3).

What is section 3 counsel?

 Section 3 of the SDA as amended, states:

Counsel for person whose capacity is in issue

3(1) If the capacity of a person who does not have legal representation is in issue in a proceeding under this Act,

• the court may direct that the Public Guardian and Trustee arrange for legal representation to be provided for the person; and
• the person shall be deemed to have capacity to retain and instruct 1992, c.30, s.3(1).

Responsibility for legal fees

• If legal representation is provided for a person in accordance with clause (l)(a) and no certificate is issued under the Legal Aid Services Act, 1998 in connection with the proceeding, the person is responsible for the legal 1992, c. 30, s. 3( 2); 1998, c.26, s.108.

Same

• Nothing in subsection (2) affects any right of the person to an assessment of a solicitor’s bill under the Solicitors Act or other review of the legal fees and, if it is determined that the person is incapable of managing property, the assessment or other review may be sought on behalf of the person by,
• the person’s guardian of property; or
• the person’s attorney under a continuing power of attorney for property. 2009, c. 33, 2, s. 71(1).

Section 3 of the SDA states that, where the capacity of a person is at issue in a proceeding, that person will be deemed to have the capacity to instruct counsel for the purposes of that proceeding.

What are the duties of s. 3 counsel?

 The leading case of Sylvester v. Britton 2018 ONSC 6620 lists the duties of section 3 counsel:

1. Seek instructions from [the individual] and act on those instructions;
2. Keep confidential all communications with [the individual] and all information that he/she obtains from the individual or on the individual’s behalf;
3. Diligently and ethically advance [the individual’s] interests in accordance with her instructions;
4. Ensure that legal, procedural and evidentiary requirements are tested;
5. Make [the individual’s] position or wishes known to the court; and
6. If [the individual] lacks capacity to provide instructions at any point in the litigation, promptly take steps for the appointment of a litigation

Section 3 counsel is still required to follow Spears’ instructions, advocate on her behalf and determine if the client has the capacity to provide instructions – this is essentially the role of counsel.

Spears’ prerogative to counsel

 Spears’ fundamental right to choose her lawyer has now been restored. In Ontario, this would mean that her lawyer has been satisfied that Spears has capacity to instruct him or her and she does not require to continue to be deemed to have the capacity for the purposes of instructing counsel. This supports her case as it illustrates that she has the capacity, and a guardianship/conservatorship is not required.

For someone who has had all her decision making and financial freedom taken away, having the chance to make a major life altering decision in choosing her advocate is a matter of significance.

Legal fees

 Despite s. 3 counsel being court directed, the legal fees of s. 3 counsel would still be borne by Spears (in this hypothetical) . From section 3(2)  of the  SDA, appointed  counsel  would  be permitted  to reimburse themselves from Spears’ funds for the  work  on her file. If  the legislation is similar to Ontario, Spears is still responsible for her court appointed lawyer’s fees.

Overall, Spears being able to choose her own lawyer may be indicative that she has the capacity to instruct counsel and doesn’t need to be deemed to be able to do this by the courts. With the free Britney movement, it is a hopeful step for Spears to be rid of what she would say is a “toxic” relationship with her father.

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Last month we looked at the capacity for a will. Now we will look at the capacity for powers of attorney, mainly the power of attorney for property and power of attorney for personal care.

Power of attorney for property

Section 8 (1) of the Substitute Decisions Act, 1992 (the Act) states:

“A person is capable of giving a continuing power of attorney if he or she,

1. knows what kind of property he or she has and its approximate value;
2. is aware of obligations owed to his or her dependents;
3. knows that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will, subject to the conditions and restrictions set out in
4. knows that the attorney must account for his or her dealings with the person’s property;
5. knows that he or she may, if capable, revoke the continuing power of attorney;
6. appreciates that unless the attorney manages the property prudently its value may decline;
7. appreciates the possibility that the attorney could misuse the authority given to him or her”

Power of attorney for personal care

Section 47(1) of the Act states:

“A person is capable of giving a power of attorney for personal care if the person,

1. has the ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and
2. appreciates that the person may need to have the proposed attorney make decisions for the person”

The Act further states:

A person is capable of revoking a continuing power of attorney if he or she is capable of giving one (s.8(2)).

A continuing power of attorney is valid if the grantor, at the time of executing it,  is capable  of giving it, even if he or she is incapable of managing property (s. 9(1)).

The continuing power of attorney remains valid even if, after executing it, the grantor becomes incapable of giving a continuing power of attorney (s. 9(2)).

Some would say that the requisite capacity to grant a power of attorney for property is “higher” and requires a greater ability to understand and appreciate compared to the capacity to grant a power of attorney for personal care. However, in Covello v. Sturino [2007] O.J. No. 2306, Justice Rose Boyko stated that the requisite capacity shouldn’t be judged as “higher” or “lower” but simply different.

In the case of Knox v. Burton [2004] O.J. No. 1267, upheld by the Court of Appeal, Petronella Knox was 80 years old and following a family conflict, three capacity assessors were retained, whereby one found her incapable and two found her capable.

It was decided that she was capable based on the presumption of capacity that had not been rebutted by any compelling evidence. It was stated that there is no value describing capacity as high or low. A person who is cognitively impaired can fluctuate, meaning they can be capable at one time and incapable at another.

This case shows that an expert opinion may not be definitive. The capacity assessor should focus on the person’s ability to reason and understand rather than the family dispute. The question of capacity is a finding of fact.

A legal test

The capacity to grant or revoke a power of attorney is a legal test. It is up to the lawyer drafting the power of attorney documents to determine capacity. If the lawyer is satisfied that there is capacity and has documented his/her discussion with the client, there may not be a need for a capacity assessment.

If the lawyer has doubts, a capacity assessment is helpful, although the person with questionable capacity would need to agree to this assessment. It is the duty of the lawyer to ensure the client  is capable of granting either kind of power of attorney before arranging the signing of these documents. Lawyers should be well versed in the criteria for capacity, conduct a thorough interview and ultimately use good judgment when deciding whether a client is capable.

Guardianship – When There is no Power of Attorney in Place

By: Kim Gale and Gabriela Caracas

The average person does not give much thought to giving someone authority to act on their behalf though a Power of Attorney (“POA”), that is, until they are at a lawyer’s office. A serious medical issue in which incapacity becomes an inevitable reality for mom and dad may mean that it is too late for them to draft a POA. 

It is not uncommon for people to live their entire lives not knowing what a Power of Attorney is, but need it when it is too late. When is it too late? In order to have a valid Power of Attorney, capacity is required at the time of creating the document. If you are already incapacitated and incapable of making personal and financial decisions regarding your affairs, you are not capable to designate someone to handle those for you.

So what happens then when your family member or close friend becomes incapacitated and never had a Power of Attorney? You can still step in to help someone close to you by being appointed as their guardian. 

Both the Office of the Public Guardian and Trustee (PGT) and the court have authority to appoint guardians. 

The PGT can appoint a guardian in instances where they are already acting as a guardian for the incapable person, and in turn appoint another individual, such as a relative, spouse or partner, to act in their place. In this scenario a court order is not required and you can submit two forms to the PGT for consideration – (1) Application to replace the Public Guardian and Trustee as Statutory Guardian of Property, and (2) Management Plan. 

Alternatively, the court can appoint a guardian. This process is lengthier and not as straightforward, as you will need to demonstrate to the court that your mom or dad is incapable and as a result that they require a guardian. Even with the application to the court, the PGT remains involved as you are required to serve the PGT with your application to the court. 

The court will consider the following in making determinations under guardianship applications: 

• the age of the proposed guardian;
• where the proposed guardian resides;
• the closeness of the relationship between the proposed guardian and the incapable person; 
• views of other people who are involved in the incapable person’s life; 
• the incapable person’s current wishes, if they can be ascertained; and
• the management plan. 

Despite the fact that not all is lost when someone becomes incapacitated and does not have a Power of Attorney, it is still advisable to pursue the necessary steps to have one drafted before it is too late. By having a Power of Attorney, you are the ultimate decision maker,  and you do not have to leave such an important decision at the hands of the PGT and/or court. 

It is important you contact a lawyer to better understand your rights. 

Gabriela Caracas is an Associate at Fogler, Rubinoff LLP who practices litigation and is growing her practice in estate litigation. 

Your Parent Can’t Handle Their Finances – What Do You Do?

A very common effect of aging is cognitive deterioration. In fact, Statistics Canada reports that 1.4 million Canadians will be living with some form of dementia or cognitive impairment by 2031. Mom, dad, or both could be one of the 1.4 million Canadians, meaning that they may be unable to properly handle their affairs. 

 If this is the case with one or both of your parents, there is a solution. You can become the attorney for mom or dad. 

 Hold on, it’s not what you’re thinking. You are not required to study for the LSAT and graduate from law school. It is much simpler than that. Your parent can appoint you as their attorney under a document called Power of Attorney (POA). However, they must do this while they have capacity (which we will discuss in next week’s post). This is a legal document in which one person gives another person(s) the authority to act on their behalf. There are three types of POAs: 

(1) Power of Attorney for Property

(2) Enduring or Continuing Power of Attorney for Property

(3) Power of Attorney for Personal Care

A POA for Property specifically covers financial affairs and automatically ends at a certain time, such as if your parent became mentally incapacitated or passed away. This POA is most often used to address a particular circumstance within a specified time period, say if your parent planned to be out of the country for a significant duration of time. 

The difference with the Enduring/Continuing POA for Property is that it allows you to continue to manage your parent’s financial affairs even if they became mentally incapacitated. Sometimes it only comes into effect on mental incapacity – you have to read the document to see when it can be enacted.

Lastly, a POA for Personal Care covers all decisions of a personal nature, such as medical treatment, nutrition, hygiene, housing, and more.

Once mom/dad passes away, your attorney status/responsibilities end.

If you’re appointed as an attorney, remember to never represent yourself as “my mom’s/dad’s Power of Attorney”, this is incorrect! “Power of Attorney” is the name of the document. You are not your mom’s/dad’s document, you are your mom’s/dad’s attorney. 

 So what does this mean for you, being appointed an attorney under a Power of Attorney for Property? This means that your parent has given you the right to access their bank account to pay monthly bills, to manage their investments, to sell their real estate, to manage their property and so on. Generally, it covers all of the parent’s property and financial affairs. It can also be limited, such as handling the mortgage payments only, which would be clearly outlined in the document.  

 In order to have a legal Power of Attorney for Property, the document needs to be in writing and signed by your parent and two witnesses. You as the attorney, or your spouse or partner, or your parent’s spouse or partner, or any person under the age of 18 cannot be a witness. You are also expected to keep records of where all the money is coming and going, including keeping receipts.

 It is wise to plan and prepare for your parent’s imaginable kryptonite; regrettably, they are not invincible, as you once may have thought. Nevertheless, the guardian role can be passed to the younger generation – Robin can step up to protect Batman via a Power of Attorney. 

It is important you contact a lawyer to better understand your rights. 

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

By Kimberly Gale

If your client is appointed as attorney for property and/or attorney for personal care under a power of attorney document, here is a quick checklist of how to advise them on their compensation.

The Fee Schedule 

Section 40(1) of the Substitute Decisions Act, 1992, c. 30 (SDA) provides: “A guardian of property or attorney under a continuing power of attorney may take annual compensation from the property in accordance with the prescribed fee scale.” [emphasis added]

The fee scale is contemplated in s.40(1) of the SDA and set out in Ontario Regulation 26/95, section 1:

“An Attorney for Property shall be paid:
3% on capital and income receipts;
3% on capital and income disbursements; and
3/5 of 1% of the annual average value of the assets under administration as a ‘care and management fee.’ ”

Proper Records 

An attorney for property must act in the best interest of the incapable person and keep proper records.

The accounts maintained by an attorney under a continuing power of attorney and a guardian of property shall include (relevant terms bolded):

• 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;
• 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;
• 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;
• 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;
• 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;
• 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;
• 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;
• An ongoing list of all compensation taken by the attorney or guardian, if any, including the amount, date and method of calculation;
• A list of the assets and value of each, used to calculate the attorney’s or guardian’s care and management fee.

No Receipts

If cash was paid, the attorney for property should detail the amount, date, purpose of payment and whom it was paid, to satisfy this requirement.

However, the Zimmerman v. McMichael Estate 2010 ONSC 2947 case elaborates that an attorney will be held personally liable for unsubstantiated withdrawals if the attorney fails to retain receipts supporting substantial cash withdrawals. This case makes it clear that without proper accounting as a condition for being awarded compensation, the court is unable to assess the conduct of the fiduciary to determine the entitled compensation.

In Rodney and Ian Hull’s book, Macdonell, Sheard and Hull on Probate Practice, they state that the court can only deprive the executor of compensation for exceptional misconduct. If the neglects are not dishonest the executor cannot be deprived; however, the amount of compensation received might be influenced.

An attorney may be disentitled to compensation where the attorney fails to keep proper accounts and was grossly indifferent to his/her fiduciary obligations. Only exceptional misconduct should deprive an attorney of their right to remuneration.

Passing of Accounts

A passing of accounts is where an attorney for property would present their accounts in the presentation of formal accounts to the court and ask for the court to approve their accounting. It is like a court audit of your accounts. It is brought by way of application.

There is no obligation for an attorney for property to pass his/her accounts.

Other parties may apply for the attorney for property to pass their accounts. The following persons may also apply (s.42 (4) of the SDA):

1. The grantor’s or incapable person’s guardian of the person or attorney for personal care.
2. A dependant of the grantor or incapable person.
3. The Public Guardian and Trustee.
4. The Office of the Children’s Lawyer.
5. A judgment creditor of the grantor or incapable person.
6. Any other person, with leave of the court.

In reference to number 6, case law that states such leave shall be granted sparingly, with some evidence of misconduct (Groh v Steele 2017 ONSC 3625).

As set out in para 40(1) of the SDA, an attorney for property is entitled to take annual compensation according to the prescribed fee.

Therefore, an attorney for property does not need to pass their accounts to take compensation, unlike an estate trustee. However, it is prudent that attorneys keep proper records to prove that expenses were properly incurred on behalf of the incapable person and that compensation was taken according to the fee schedule.