CETA-1 (3rd ed) - Chap 11 - Substitute Decision-makers for Financial Affaris PDF

Chapter 11 Substitute Decision-makers for Financial Affairs Learning Objectives.............................................................................................................. 11-4 11.1 Introduction............................................................................................................. 11-6 11.2 Enduring Power of Attorney................................................................................... 11-6 11.2.1 General Rules Applying to a Power of Attorney......................................................... 11-6 11.2.2 Statutory Recognition of Enduring Powers of Attorney............................................... 11-7 11.2.3 Legislation Governing the Making, Use, and Termination of an Enduring Power of Attorney.......................................................................................................11-7 11.2.3.1 Quebec Only: A Power of Attorney Is a Contract of Mandate...................11-8 11.2.4 Formal Requirements for Making an Enduring Power of Attorney..........................11-9 11.2.4.1 Common Law Only...................................................................................11-9 11.2.4.2 Quebec Only............................................................................................11-9 11.2.5 Capacity to Make an Enduring Power of Attorney................................................ 11-10 11.2.5.1 Common Law Only: Capacity to Make an Enduring Power of Attorney. 11-10 11.2.5.2 Common Law Only: Statutory Tests of Capacity to Make an Enduring Power of Attorney................................................................................... 11-11 11.2.5.3 Quebec Only: Capacity to Make Protection Mandate............................. 11-13 11.2.6 When Does an Enduring Power of Attorney Come into Effect?............................ 11-13 11.2.6.1 Common Law Only................................................................................. 11-13 11.2.6.2 Common Law Only: Exceptions to the Attorney’s Immediate Authority to Act...................................................................................................... 11-14 11.2.6.3 Common Law Only: Alternatives to a Springing Power of Attorney......... 11-14 11.2.6.4 Quebec Only.......................................................................................... 11-15 11.2.7 Appointing the Attorney......................................................................................11- 16 11.2.7.1 Who Can be Appointed to be an Attorney?............................................ 11-16 11.2.7.2 Appointing More than One Attorney at the Same Time........................... 11-17 11.2.7.3 Persons Who May Not be Appointed...................................................... 11-17 11.2.7.4 Alternate Attorneys................................................................................. 11-17 11.2.7.5 Multiple Powers of Attorney.................................................................... 11-18 11.2.8 Acceptance of an Appointment as Attorney......................................................... 11-18 11.2.8.1 Practical Issues...................................................................................... 11-19 11.2.9 Duties and Powers.............................................................................................. 11-19 11.2.9.1 Common Law Only: Common Law Duties.............................................. 11-20 11.2.9.2 Quebec Only: The Mandatary’s Duties under the CCQ.......................... 11-20 11.2.9.3 Limits on an Attorney’s Power................................................................ 11-20 11.2.9.4 Gifts and Donations................................................................................ 11-21 11.2.9.5 Acting in Self-interest or Conflict with the Donor..................................... 11-21 11.2.9.6 Wills and Beneficiary Designations......................................................... 11-22 11.2.9.7 Disposing of Gifts in Wills....................................................................... 11-22 11.2.9.8 Common Law Only: Personal Acts and Delegation................................ 11-22 11.2.9.9 Quebec Only: Personal Acts and Delegation.......................................... 11-23 11.2.10 Compensation........................................................................................ 11-23 Substitute Decision-makers for Financial Affairs 11.2.10.1 Common Law Only................................................................................. 11-23 11.2.10.2 Quebec Only.......................................................................................... 11-23 11.2.11 Record Keeping and Accounting............................................................ 11-24 11.2.11.1 Common Law Only................................................................................. 11-24 11.2.11.2 Quebec Only.......................................................................................... 11-24 11.2.12 Revocation by the Donor........................................................................ 11-24 11.2.13 Termination Events................................................................................ 11-25 11.2.13.1 Common Law Only................................................................................. 11-25 11.2.13.2 Quebec Only.......................................................................................... 11-25 11.2.14 Resignation and Renunciation by Attorney............................................. 11-25 11.2.15 Dealing with Assets Outside the Jurisdiction.......................................... 11-26 11.2.16 Using a Power of Attorney to Deal with Real Property............................ 11-27 11.3 Guardianship......................................................................................................... 11-27 11.3.1 Introduction............................................................................................................. 11-27 11.3.2 Who Can be Appointed?.......................................................................................... 11-28 11.3.3 Requirements for a Court Appointment.................................................................... 11-28 11.3.4 Duties and Powers.................................................................................................. 11-29 11.3.5 Oversight or Monitoring........................................................................................... 11-30 11.3.6 Compensation......................................................................................................... 11-30 11.3.7 Inter-jurisdictional Issues......................................................................................... 11-30 11.4 Enduring Powers of Attorney Versus Property Guardians (In Quebec: Protective Supervision)......................................................................................... 11-31 11.5 Common Law Only: Statutory Guardianship........................................................ 11-32 11.5.1 What is Statutory Guardianship................................................................................ 11-32 11.5.2 Ontario Only: Rules for Replacing a Statutory Property Guardian............................. 11-32 Figure 11.1: Quebec Only: Recognition of Foreign Enduring Power of Attorneys................ 11-27 Figure 11.2: Comparing Enduring Power of Attorney and Court Ordered Property Guardian.................................................................................................................................................. 11-31 11-2 Chapter 11 Substitute Decision-makers for Financial Affairs REMINDER: Terminology varies significantly between provinces, and even more so with Quebec. This chapter revisits the many names and terms for different types of substitute decision-makers introduced in Chapter 2. For ease of reading, the word or phrase selected in Chapter 2 for purposes of the materials in this course will be used. Jurisdiction-specific terminology is only used if required or appropriate for the context. See the Generic Terms Cheat Sheet for the full list of generic terminology. The terms relevant for this chapter are set out below. Generic term Other Common Law Terms CCQ Term Agent (in relation to a power Agent, attorney, donee Mandatary of attorney/Mandate for a period where the maker is still capable) Attorney (in relation to Attorney Mandatary to the enduring power of attorney – property financial affairs) Enduring power of attorney Enduring power of attorney; Protection Mandate (enduring power of attorney) Continuing power of attorney (ON) Guardian Guardian, Committee Curator, Tutor Trustee (AB) Maker (of a decision-making Donor, Grantor (maker of a power Mandator document) of attorney or directive or proxy) (Maker of a mandate) Personal Directive Representation Agreement (BC), Protection Mandate Power of attorney for Personal Care (ON) Personal Guardian Committee of person; Curator, Tutor Guardian of person Principal (in relation to an Donor, Grantor, Principal Mandatory agency e.g. power of attorney, mandate for a period when the maker is still capable e.g. power of attorney, mandate) Property Guardian Committee of estate, Guardian for Curator, Tutor property, Trustee (AB) Proxy Representative; Attorney for Mandatary to the personal care (ON) person Learning Objectives As our population ages and life expectancies rise, there is an increasing likelihood that an older person will need assistance with managing his or her financial affairs due to physical limitations and/or declining mental capacity. The need is not limited to older adults. Any adult may require assistance at any time during his or her lifetime. A person may have an intellectual disability from an early age or may suffer a brain injury or other debilitating disease or accident. When a person cannot manage financial matters on his or her own, it may become necessary for the court to appoint a property guardian. Many, however, have the opportunity to plan ahead and may choose to do so by appointing an attorney under an enduring power of attorney. Whether appointed as a property guardian or attorney (see Chapter 2 Trustees, Personal Representatives, and Substitute Decision-makers), the substitute decision-maker becomes a fiduciary and owes duties to the adult very similar to those owed by a trustee to a trust’s beneficiaries. Unfortunately, these duties are not always well understood. In addition, the role can be onerous and time consuming. Increasingly corporate trustees are sought out to accept appointments as substitute decision-makers whether as an attorney under an enduring power of attorney or a property guardian. Where individuals are appointed, it falls to professional advisors to help educate their clients. Where an enduring power of attorney is being considered, both the maker and the attorney require guidance and advice on the role and responsibilities of the attorney, and the maker’s rights. Upon completion of this Chapter students will be able to: Identify the requirements for making a valid enduring power of attorney Explain why the test of capacity is not a single test Explain when an enduring power of attorney comes into effect Summarize the general rules governing who may be appointed as an attorney Summarize the duties and powers of an attorney appointed pursuant to enduring power of attorney Summarize the rules governing compensation of an attorney Summarize the rules governing an attorney’s duty to account Identify the ways that an enduring power of attorney can be terminated Identify the options for removing or replacing an attorney Discuss the issues that may arise when inter-jurisdictional connections arise Identify the steps required to appoint a property guardian Substitute Decision-makers for Financial Affairs o Common Law Only: Distinguish a property guardian and a statutory property guardian Summarize the duties and powers of a property guardian Summarize the rules governing a property guardian’s duty to account Summarize rules governing the compensation of a property guardian Compare the advantages and disadvantages of an enduring power of attorney and a property guardian Demonstrate learning by applying rules and concepts to a given scenario 11-5 Substitute Decision-makers for Financial Affairs 11.1 INTRODUCTION In Chapter 2, Trustees, Personal Representatives, and Substitute Decision-makers, students were introduced to the different kinds of fiduciaries, including substitute decision-makers. Students should refer to that chapter for definitions and a discussion of general fiduciary duties. This Chapter provides more detailed information about the appointment of substitute decision- makers who have responsibility for financial and legal affairs. It also reviews duties, powers, compensation rules, oversight and monitoring rules, and other unique issues. The terms that are used in this Chapter were defined earlier (see Chapter 2 at 2.5.2 Financial and Legal Decision-makers). They are: Maker (the adult who makes an enduring power of attorney), Attorney (the person appointed in an enduring power of attorney), Enduring power of attorney (a power of attorney that continues, or comes into effect, when a donor become incapable),1 and Property guardian (the person(s) appointed by the court to manage the financial and legal affairs of an adult who has been declared incapable of managing his or her own financial affairs.) Students should refer to their own legislation for the proper terminology, which can also be found in Chapter 2 (see Figure 2.5 Substitute Decision-makers by Jurisdiction). NOTE: This Chapter does not deal with the legal roles that authorize a person to make personal or health-care decisions. Neither does it address supported or assisted decision-making roles available in some jurisdictions. Generally these roles will be filled by individuals who are family or friends. Corporate trustees are not authorized to accept appointments to make personal or health-care decisions, and it is not practical for corporate trustees to assume supported or assisted decision-making roles for financial matters. Trust companies generally only accept appointments to act as an attorney under an enduring power of attorney or by the court to act as property guardian. 11.2 ENDURING POWER OF ATTORNEY 11.2.1 General Rules Applying to a Power of Attorney A power of attorney that is not an enduring power of attorney is an agency relationship that is limited to financial and legal matters. Quebec Only: The power of attorney is a contract of mandate. See 11.2.3.1 Quebec Only: A power of attorney is a Contract of Mandate for more information. 1 In the United States, an enduring power of attorney is often called a “durable power of attorney”. 11-6 Substitute Decision-makers for Financial Affairs The following rules generally apply. A power of attorney terminates on the death, bankruptcy, or subsequent mental incapacity of the donor. A power of attorney can be revoked at any time by the donor, providing the donor has capacity. The attorney cannot delegate his or her duties to another person unless specifically permitted in the power of attorney. The authority granted to the attorney is strictly interpreted and the language used will not be broadly construed. The attorney has a fiduciary duty to act in good faith, and must avoid any act that conflicts with the interest of the donor. The attorney has a duty to account to the donor. Common Law Only: Subject to statutory rules, the attorney has a right to remuneration and reimbursement of expenses.2 Quebec Only: No remuneration is required if the mandate is by gratuitous title, that is, a mandate entered into between two individuals is presumed gratuitous (art. 2133 CCQ). If it is a professional mandate it is presumed to be by onerous title. 11.2.2 Statutory Recognition of Enduring Powers of Attorney All jurisdictions have passed legislation that allows a donor to make a power of attorney that continues after the donor becomes incapable. (See Chapter 2 at Figure 2.5 Substitute Decision- makers by Jurisdiction, for a list of substitute decision-maker legislation and roles.) Some jurisdictions have also addressed the right to compensation and the duty to account. Common Law Only: Subject to legislative amendments, the remaining common-law principles and other duties continue to apply either as part of the common law, or because they have been specifically included in provincial or territorial legislation. Quebec Only: The rules governing the mandatary are set out in the CCQ and are discussed below. 11.2.3 Legislation Governing the Making, Use, and Termination of an Enduring Power of Attorney The specific rules for making an enduring power of attorney vary between jurisdictions. In some cases the differences are minor, but in others they are more significant. For example, some require two witnesses, others only require one but the witness must have certain qualifications. Some have rules regarding who can or cannot be an attorney. The legislation of some provinces 2 For a more detailed discussion of the common law rules that govern the donor/attorney relationship, see Sweatman Capacity at pp 1-27. 11-7 Substitute Decision-makers for Financial Affairs provides for resolving disputes if there is more than one attorney acting at the same time. Some set out rules for compensation and some set out duties, including the duty to account or to be ready to account. Others also set out the methods for renouncing the appointment and identify events that will terminate the attorney’s authority. The provincial and territorial legislation governing this area of the law are identified in Chapter 2 at Figure 2.5, Substitute Decision-makers by Jurisdiction. It is beyond the scope of this course to review the provincial rules in detail. In the sections that follow, the general rules are discussed. Study Note: For purposes of this course students are responsible for the content within this Chapter and Chapter 2 Trustees, Personal Representatives, and Substitute Decision-makers. 11.2.3.1 Quebec Only: A Power of Attorney Is a Contract of Mandate A power of attorney under the civil law of Quebec is a contract of mandate. Chapter Nine of the Book on Obligations in the Civil Code of Québec (CCQ) codifies the law on mandate, and article 2130 CCQ defines mandate as follows: Art. 2130. Mandate is a contract by which a person, the mandator, empowers another person, the mandatary, to represent him in the performance of a juridical act with a third person, and the mandatary, by his acceptance, binds himself to exercise the power. The power and, where applicable, the writing evidencing it are called the power of attorney. The first paragraph of article 2130 CCQ indicates that the parties to a contract of mandate are called the mandator (the “mandator”) and the mandatary (the “mandatary”), while the second paragraph clarifies the meaning of the term “power of attorney”, which merely embodies the simple concept of mandate (or in common-law parlance, the concept of principal and agent) but without the feature of durability during incapacity. In ordinary parlance and in practice, other terms are used to describe the parties, as for example, “donor”, “grantor” or “constituent” instead of mandator, and in the case of the mandatary, the term “attorney” is the preferred term, but “donee” and “grantee” are also used. For purposes of this Chapter, the terms “mandator” and “mandatary” are used when discussing Quebec laws only. The generic terms noted above (e.g. “maker” and “attorney”) are used when the Chapter is referring to rules across Canada for financial decision-making. Article 2131 of the CCQ recognizes a parallel juridical concept to the common law enduring power of attorney. It is called a protection mandate. The object of the mandate is set out as follows: Art. 2131. The object of the mandate may also be the performance of acts intended to ensure the personal protection of the mandator, the administration, in whole or in part, of his patrimony as well as his moral 11-8 Substitute Decision-makers for Financial Affairs and material well-being, should he become incapable of taking care of himself or administering his property. The protection mandate applies to decision-making for financial, personal and health care. As noted in the generic terms sheet, unless the text is referring to Quebec law only, the protection mandate relating to financial matters is referred to as an enduring power of attorney. See the Generic Terms Cheat Sheet for the terminology for personal and health- care decisions. 11.2.4 Formal Requirements for Making an Enduring Power of Attorney 11.2.4.1 Common Law Only Provincial legislation requires an enduring power of attorney to be in writing, signed by the donor, and witnessed. The witness rules vary significantly across the country. Students should review the legislation for their jurisdiction. Failure to comply with the requirements could result in the appointment being invalid. Details to watch for include:3 Is the attorney or the attorney’s spouse prohibited from being a witness? Are other family members related to the attorney prohibited from being a witness? Does the witness need to have special qualifications?4 Can someone under the age of majority make the document and, if so, what are the criteria? Are there specific provisions about the age of the attorney and/or when the attorney can act if the attorney is a minor when the document is created? 11.2.4.2 Quebec Only The CCQ does not set out formal requirements for making a power of attorney. Since a power of attorney is a contract of mandate, the general rules on contracts and capacity apply.5 However, specific and stricter rules govern the making of the protection mandate. The formal requirements are set out at article 2166 and 2167 CCQ. Article 2166 notes the two steps that are required for a protection mandate to come into force. Specifically, it must be properly made. But, it is not in effect until the mandator’s incapacity is confirmed and the document is homologated by the court. 3 Students are not required to know these details for exam purposes. 4 For example, some of the strictest rules are found in Manitoba and British Columbia. In Manitoba a witness must be a person who can solemnize marriages, a justice of the peace, notary public or lawyer licensed to practice in Manitoba, or member of the RCMP or police officer (s. 11). In British Columbia, two witnesses are not required if the witness is a lawyer or a member in good standing of the Society of Notaries Public of British Columbia (s. 16). In Quebec a mandate need not be witnessed if made by a notary. Art. 2167 sets out alternative rules. 5 Although there are no rules on who may be a witness, best practice is to ensure a witness does not have an interest in the making of the mandate. 11-9 Substitute Decision-makers for Financial Affairs Art. 2166. A mandate given by a person of full age in anticipation of his incapacity to take care of himself or to administer his property is made by a notarial act en minute or in the presence of witnesses. The performance of the mandate is subordinate to the occurrence of the incapacity and to homologation by the court, at the request of the mandatary designated in the act. Article 2167 CCQ provides the rules for the witnesses, which are similar to those for a will made in the presence of witnesses. Art. 2167. A mandate given in the presence of witnesses is written by the mandator or by a third person. The mandator, in the presence of two witnesses who have no interest in the act and who are in a position to ascertain whether he is capable of acting, declares the nature of the act but need not disclose its contents. The mandator signs the act at the end or, if he has already signed it, recognizes his signature; he may also have a third person sign the writing for him in his presence and according to his instructions. The witnesses sign the mandate forthwith in the presence of the mandator. The purpose of the formal requirement for a notarial act or for an act under private signature made in the presence of two witnesses is to ensure that at the time the protection mandate was given, the mandator was capable. 11.2.5 Capacity to Make an Enduring Power of Attorney The legal test of capacity depends on the decisions to be made or actions to be taken. For example, the test for capacity to make an enduring power of attorney is different from the test for capacity to manage one’s financial affairs; and the age for voting in an election is not the same as the legal age for deciding to get married. 11.2.5.1 Common Law Only: Capacity to Make an Enduring Power of Attorney In order to make an enduring power of attorney, a donor must have attained the age of majority, and have the required mental capacity to understand the nature and effect of the power being granted.6 Subject to any statutory tests for a particular jurisdiction, in order to grant a valid enduring power of attorney, the donor must also have the mental capacity 6 See Sweatman Capacity at pp. 9-13. 11-10 Substitute Decision-makers for Financial Affairs to understand the nature and effect of the document. This requires that the donor understands:7 the attorney will have the power to take complete control of the donor’s financial affairs; during the lifetime of the donor, the attorney will be able to do anything the donor could do with the donor’s property; the authority granted will continue in the event the donor subsequently becomes mentally incapable, once the donor becomes mentally incapable, the power of attorney will be irrevocable, and the attorney must understand the nature and extent of his or her property and financial affairs existing at the time the document is executed over which the attorney will be entitled to exercise control. 11.2.5.2 Common Law Only: Statutory Tests of Capacity to Make an Enduring Power of Attorney A number of jurisdictions have now set out the test for capacity to make an enduring power of attorney in the applicable legislation. These include: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Newfoundland and Labrador, the Yukon, and the Northwest Territories. A review of the legislation reveals that the test is generally consistent with the common law, but there is limited case law to confirm this and/or identify distinctions. Students are encouraged to become familiar with their provincial rules. The two examples below illustrate the range of statutory provisions. Examples: Ontario’s Substitute Decision Act defines the test for being incapable of managing one’s property (s. 6) and sets out a different test for capacity to make a continuing power of attorney (s. 8). Incapacity to manage property 6. A person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision. 1992, c. 30, s. 6. Capacity to give continuing power of attorney 8. (1) A person is capable of giving a continuing power of attorney if he or she, 7 The case Re K, All E.R. 358 (Ch. D.) established the first four elements of the test. The Canadian case of Godielie v. Pauli (Committee of) (1990), 39 E.T.R. 40 (Ont. Dist. Ct.) added the fifth element. See discussion in Sweatman Capacity at pp. 10-12. 11-11 Substitute Decision-makers for Financial Affairs (a) knows what kind of property he or she has and its approximate value; (b) is aware of obligations owed to his or her dependants; (c) 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 the power of attorney; (d) knows that the attorney must account for his or her dealings with the person’s property; (e) knows that he or she may, if capable, revoke the continuing power of attorney; (f) appreciates that unless the attorney manages the property prudently its value may decline; and (g) appreciates the possibility that the attorney could misuse the authority given to him or her. 1992, c. 30, s. 8 (1). Capacity to revoke (2) A person is capable of revoking a continuing power of attorney if he or she is capable of giving one. 1992, c. 30, s. 8 (2). British Columbia’s legislation states that there is a presumption of capability (s. 11) and then sets out the test to be applied to determine if an adult is incapable of making an enduring power of attorney (s. 12). Adults presumed to be capable 11 (1) Until the contrary is demonstrated, an adult is presumed to be capable of (a) making decisions about the adult's financial affairs, and (b) understanding the nature and consequences of making, changing or revoking an enduring power of attorney. (2) An adult's way of communicating with others is not grounds for deciding that the adult is incapable of making the decisions or having the understanding referred to in subsection (1). Adult may make enduring power of attorney unless incapable 12 (1) An adult may make an enduring power of attorney unless the adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney. (2) An adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney if the adult cannot understand all of the following: (a) the property the adult has and its approximate value; (b) the obligations the adult owes to his or her dependants; (c) that the adult's attorney will be able to do on the adult's behalf anything in respect of the adult's financial affairs that the adult could do if capable, except 11-12 Substitute Decision-makers for Financial Affairs make a will, subject to the conditions and restrictions set out in the enduring power of attorney; (d) that, unless the attorney manages the adult's business and property prudently, their value may decline; (e) that the attorney might misuse the attorney's authority; (f) that the adult may, if capable, revoke the enduring power of attorney; (g) any other prescribed matter. 11.2.5.3 Quebec Only: Capacity to Make Protection Mandate The mandatory must be of full age (art. 153 establishes the age at eighteen). A person who has full emancipation may also make a mandate.8 The CCQ does not provide any further guidance on how to determine if a mandator is capable of making a protection mandate. 11.2.6 When Does an Enduring Power of Attorney Come into Effect? All provincial and territorial legislation provides that a power of attorney will be an enduring power of attorney if the power of attorney document contains a statement that the power of attorney may continue during the subsequent incapacity of the donor. 11.2.6.1 Common Law Only Subject to a contrary intention in the document, an enduring power of attorney is effective immediately. As a result it is important to note that the maker continues to have the right to make his or her own decisions as long as he or she is capable.9 The attorney cannot prevent the maker from dealing with his or her own assets while capable. When a power of attorney is an enduring power of attorney, the usual intention is that the attorney will not act until the maker asks the attorney to act or the maker is no longer able to make the decisions. Sometimes the maker wants to continue to manage his or her day- to-day financial affairs, but not the more complicated and time-consuming responsibilities of managing investments. The fact that both the maker and attorney have authority to make decisions can also be helpful if the maker suffers from intermittent periods of confusion, or the maker’s cognitive functioning is declining. The attorney can step in as required. This shared authority can, however, cause practical challenges, particularly when there is slow cognitive decline and the maker and the attorney can find themselves working at cross purposes. For example, the attorney may start to act and want to ensure assets are protected, but the maker may be insisting on carrying out certain transactions or making 8 See CCQ arts. 175 and 176. Art. 175 provides for a married minor to apply for full emancipation. Art. 176 enables the minor to exercise his or her full civil rights. 9 For example, see s. 27(1) of the British Columbia Power of Attorney Act. 11-13 Substitute Decision-makers for Financial Affairs expenditures that the attorney does not believe the maker has the mental capacity to make. The legal issues of “duelling authority” are beyond the scope of this course. British Columbia: The legislation specifically authorizes an attorney to act within the attorney’s authority despite the objections of the adult if the adult is incapable of making those objections.10 11.2.6.2 Common Law Only: Exceptions to the Attorney’s Immediate Authority to Act While there is a homologation requirement for a protection mandate in Quebec,11 Canada’s common law jurisdictions do not have a court process for triggering an enduring power of attorney. However legislation in most jurisdictions provides for a “springing power of attorney”. Where the legislation is silent, there is case law that supports the practice. If an enduring power of attorney is a springing power of attorney, the document will set out the criteria for when an attorney can start to act. It will also state the evidence that must be provided to third parties confirming that the attorney’s authority has started. Springing powers of attorney are helpful insofar as they usually require a specific action by an independant third party before the document can be used. While the trigger usually relates to the maker’s incapability to manage his or her financial affairs, the test may be general or specific. The risk with springing powers of attorney is that the maker’s capacity may be fluctuating and it may not be possible to trigger the enduring power of attorney. 11.2.6.3 Common Law Only: Alternatives to a Springing Power of Attorney If a maker does not wish to follow the strict requirements of a springing power of attorney, another option, if appropriate or practical in the circumstances, is to have someone the maker trusts, such as the lawyer who prepared the enduring power of attorney, hold the document and only release it to the attorney when an agreed condition occurs. When these arrangements are in place, the lawyer who prepared the power of attorney will retain the signed original of the power of attorney, along with the client’s instructions on when the document may be released. One advantage of this strategy is that the power of attorney is without a condition precedent on its face. Once it has been released, it does not have to be revalidated each time a decision is to be made or each time the document is used. 10 See s. 27(2) of the British Columbia Power of Attorney Act. 11 See below at 11.2.6.4 Common Law Only: Alternatives to a Springing Power of Attorney. 11-14 Substitute Decision-makers for Financial Affairs 11.2.6.4 Quebec Only In Quebec, a protection mandate does not come into force until the mandate is homologated (e.g. confirmed) by the court or a notary.12 Homologation renders the protection mandate executory (e.g. it becomes effective) and enables the performance of the mandate to ensure the protection of the fundamental rights of the mandator. The protection mandate only becomes executory when the mandator becomes incapable. The mandator’s incapacity must be confirmed by the court upon application by the mandatary. The application includes medical and psychosocial evidence.13 While the CCQ does not set out the test to be applied to determine if a person is incapable, guidance can be found in the CCQ, court decisions and practice. These include: The test set out in article 258 for the appointment of a tutor or curator should be considered. A tutor or curator may be appointed if the person is of full age and is incapable of caring for himself or herself or of administering property by reason, in particular, of illness, deficiency or debility due to age, which impairs the person’s mental faculties or physical ability to express his or her will. Generally, all adults are presumed capable of making their own decisions except where the law states otherwise. The courts generally evaluate capacity to exercise civil rights based on the person’s comprehension of the consequences and nature of the transaction the mandator wishes to perform. Jurisdictional issues can arise. The requirement for homologation should apply in all cases where: a protection mandate governed by the law of Quebec has been executed, whether in Quebec or outside Quebec, the mandator subsequently becomes incapable, and the mandatary presents the mandate in order to deal with the mandator’s assets in Quebec. When a person wishes to make a protection mandate, a decision must be made about the approach to be taken. The first approach expressly limits the exercise of the mandate to the situation where the mandatory is incapable. In common law jurisdictions this approach is often referred to as a springing power of attorney because the authority can only be used when the mandator is confirmed to be incapable. 12 Note that by virtue of arts. 312 and 317 of the Code of Civil Procedure, C.Q.L.R., c. C-25.01 (“CCP”), concurrent jurisdiction to homologate the mandate has been conferred upon notaries duly authorized to practice in Quebec, but only if the matter is non-contentious. 13 Art. 309 and 312 of the CCP. Arts. 242-245 of the CCP set out rules for applicable physical, medical or psychosocial examinations. 11-15 Substitute Decision-makers for Financial Affairs The second, and often preferred, approach combines the general power of attorney and the protection mandate. While drafting styles vary, the document provides for two mandates: o the first mandate is a power of attorney o the second mandate sets out the protection mandate The power of attorney is executory from the moment of execution of the instrument. The protection mandate becomes executory only upon the occurrence of incapacity and homologation by the court or a notary. Importantly however, article 2167.1 CCQ provides for the continued operation of the power of attorney part of the combined format during the homologation proceedings since it could take months before a judgment is rendered.14 This approach also allows the mandatary to assist the mandator while the mandator is still capable. 11.2.7 Appointing the Attorney Chapter 2, Trustees, Personal Representatives, and Substitute Decision-makers, reviewed general considerations when appointing a fiduciary, whether that fiduciary is a trustee, executor, or attorney. The sections that follow identify specific considerations and rules that apply to the appointment of an attorney in an enduring power of attorney and assume that the attorney has indicated a willingness to act. 11.2.7.1 Who Can be Appointed to be an Attorney? Generally, an attorney must be capable of acting. This means that he or she must have reached the age of majority and have the mental capability to manage one’s financial affairs. While the law requires the maker to have capacity (e.g. age of majority, unless there is an exception for married persons or minors in certain situations, and capable of understanding the document), there are no rules prohibiting the appointment of a minor as the attorney. However, a minor will not be able to act until reaching the age of majority. In addition to individuals, corporate trustees may be appointed. In some jurisdictions the Public Trustee (also known as the Public Guardian and Trustee, or Public Curator in Quebec) may be permitted to accept appointments. However, they may not be compelled to accept the appointment, so approval should be sought in advance. 14 Art. 2167.1 CCQ states: Art. 2167.1. During homologation proceedings or even before if a request for homologation is imminent and it is necessary to act to prevent serious harm to the mandator, the court may issue any order it considers necessary to ensure the personal protection of the mandator, his representation in the exercise of civil rights or the administration of his property. An act under which the mandator has entrusted the administration of his property to another person continues to produce its effects notwithstanding the proceedings, unless the act is revoked by the court for a serious reason. 11-16 Substitute Decision-makers for Financial Affairs 11.2.7.2 Appointing More than One Attorney at the Same Time A maker may also wish to appoint more than one person to be attorney. While this can provide some safeguards for the maker, the arrangement must be workable in practice. For example, unless the document provides otherwise, attorneys must act together. Note also that when there are two or more attorneys, the power of attorney will terminate if one dies or becomes incapable unless legislation or the document permits the survivor to continue. 11.2.7.3 Persons Who May Not be Appointed Makers must also be careful to not appoint anyone who is prohibited from acting. Prohibitions generally seek to ensure the attorney will not have an inherent conflict of interest. The rules may be in the relevant power of attorney legislation or legislation governing service providers, such as residential care facilities and hospitals. Some legislation specifically prohibits appointment of individuals with a conflict of interest, such as paid caregivers.15 Some industries such as the financial industry prohibit their members from accepting appointments from clients and patients. For example, in 2013 the Investment Industry Regulatory Organization of Canada (IIROC) implemented Rule 43 that addresses personal dealings with clients and required members to unwind appointments as executors, trustees or attorneys.16 In early 2016 IIROC announced that it had extended the deadline to September 13, 2016, for advisors to wind up arrangements. Many employers, particularly those in the financial and health-care sectors, also impose their own policies prohibiting acceptance of an appointment. See also 11.2.13 Termination Events for the rules for events that will terminate an attorney’s authority. 11.2.7.4 Alternate Attorneys There may be many personal or practical reasons why an attorney cannot act when the time comes. Or, the attorney may begin to act but be unable to continue. Legislation might also prohibit an attorney from acting or continuing to act (see 11.2.13 Termination Events). Or, the attorney could become incapable or die. A power of attorney document can provide for an alternate attorney. The successor will need to prove that his or her authority is now effective. In the absence of an alternate attorney, unless the legislation allows the court to appoint a new attorney, it may be necessary to have a property guardian appointed. 15 For example, in British Columbia, s. 18 of the Power of Attorney Act prohibits those who provide personal care or health-care services to the adult for compensation, as well as employees in a facility where the donor resides if the facility provides those services. The Hospital Act, R.S.B.C. 1996, c. 200, and the Community Care and Assisted Living Act, S.B.C. 2002, c. 75, also prohibit staff and volunteers from accepting such appointments. 16 For the full text, see Rule 43 on the IIROC website http://www.iiroc.ca/Rulebook/Pages/default.aspx 11-17 Substitute Decision-makers for Financial Affairs Third parties will require evidence that the alternate has authority to act. As with springing powers of attorney, there may be legislation that sets out the requirements for an alternate to prove his authority to start acting. 11.2.7.5 Multiple Powers of Attorney It is possible for a maker to make more than one power of attorney. For example, one document could appoint one person to deal with real estate or business transactions, while another could be limited to bank accounts or an investment account. Makers who prepare more than one power of attorney, whether or not it is an enduring power of attorney, must be extremely careful to ensure that one document does not revoke the other. Unless the document says otherwise, a new power of attorney may revoke a prior document. Some jurisdictions make this consequence clear in their legislation. For example, see Quebec and Ontario provisions below. It is beyond the scope of this course to summarize the rules for each jurisdiction. Quebec Only: The appointment of a new mandatary for the same matter is equivalent to revocation of the first mandate, from the date the former mandatary is notified of the new appointment (art. 2180 CCQ). Ontario: Section 12(1)(d) of the Substitute Decisions Act provides that a new continuing power of attorney terminates a prior power of attorney, unless the grantor (donor) specifically addresses the fact that there may be more than one continuing (enduring) power of attorney. In jurisdictions where multiple documents are permitted, and/or if documents are prepared appointing the same or different people to make decisions relating to assets in different jurisdictions, care should also be taken to ensure they do not overlap. In all cases the attorneys should be aware of the other’s authority and it is also advisable to state expressly the donor’s intention to have multiple powers of attorney. 11.2.8 Acceptance of an Appointment as Attorney As with any fiduciary appointment, the attorney must accept the appointment. In order to clarify when the document is effective, some jurisdictions now specifically provide that the attorney sign the document before the document can be used. Some also provide that the attorney must give notice in order to renounce. Where the attorney has indicated acceptance, a number of jurisdictions now impose a positive duty to act when required to do so. In these jurisdictions it is important to consider what constitutes acceptance. Alberta, Manitoba, Quebec,17 Yukon, Northwest Territories, and Nunavut: In these jurisdictions, if the attorney has indicated acceptance, there is a positive duty to act. Each jurisdiction provides for how and when this duty arises. Generally the duty to act arises once the 17 See art. 2138 CCQ. 11-18 Substitute Decision-makers for Financial Affairs attorney has accepted the appointment or has acted pursuant to the appointment and the duty exists during any period the attorney knows, or ought to know that the grantor is incapable of managing his or her financial affairs. A person who has agreed to become an attorney or who has acted as an attorney should be particularly aware of his or her obligations in these jurisdictions. Manitoba: The legislation specifically provides that an attorney may be held liable for any loss resulting from the failure to act. The attorney may avoid such obligation if there is no acceptance of the appointment or the attorney has not commenced to act. 11.2.8.1 Practical Issues Whether or not legislation addresses acceptance, the duty to act, or how to resign or renounce, there are practical issues to consider. A maker will want to notify the attorney of the appointment, and confirm that the attorney will accept the role and will start acting when required to do so. Generally, if the attorney is a family member or close friend, the attorney will know when it is time to start acting. The attorney may even start helping the maker with certain financial transactions while leaving the maker to manage day-to-day transactions. However, an attorney who is not a close family member or friend (e.g. a corporate trustee or other professional advisor18) will need to ensure arrangements are in place to ensure the attorney will be made aware that the maker requires the attorney to start acting. Clearly, the maker wants the attorney to step in when needed. Importantly for attorneys, failure to do so may attract liability, particularly in the provinces with legislation that contemplates this issue. Unless incapability arises because of a specific event or accident, the reality is that recognizing the need to start acting and determining the point in time when the maker is incapable can be difficult. The degree of incapability can fluctuate from day to day. Incapability can be the result of a medical condition that can be resolved with appropriate treatment. If the maker is a professional trustee’s client, the signs and symptoms may or may not be obvious if client meetings are infrequent. 11.2.9 Duties and Powers Once the maker is incapable, the attorney acting under an enduring power of attorney has a number of fiduciary duties. These are set out in legislation and/or the law. Many duties can be modified by the enduring power of attorney document; some may not. 18 It is not common for lawyers to accept appointments from clients. However, in limited circumstances, they may agree to act. 11-19 Substitute Decision-makers for Financial Affairs 11.2.9.1 Common Law Only: Common Law Duties Subject to duties under the legislation, and any terms in the enduring power of attorney, the common law applies. In her text Powers of Attorney and Capacity,19 Sweatman identifies nine common law duties. The attorney has the duty to: a) Stay within the scope of the authority delegated; b) Exercise reasonable care and skill in the performance of acts done on behalf of the donor (if acting gratuitously, the attorney is held to the standard of a typically prudent person managing his or her own affairs; if being paid, the attorney is held to the standard applicable to a professional property or financial manager); c) Not make secret profits; d) Cease to exercise the authority if the power of attorney is revoked; e) Not act contrary to the interests of the donor or in conflict; f) Take no compensation unless agreed on or granted by the court; g) Account for dealings with the affairs of the donor when lawfully called on to do so; h) Not make, change or revoke a will on behalf of the donor; and i) Not exercise the power of attorney for personal benefit unless authorized to do so by the document, or unless the attorney acts with the full knowledge and consent of his or her principal. 11.2.9.2 Quebec Only: The Mandatary’s Duties under the CCQ Duties similar to the common law duties listed above at 11.2.9.1 are imposed on the mandatary. See articles 2138-2148 CCQ. 11.2.9.3 Limits on an Attorney’s Power An enduring power of attorney is a powerful document. It is for this reason that some tests of incapability now include elements that address what can happen or go wrong.20 The consequences of the duties listed above are that the attorney’s authority is limited.21 Five of these limits are often misunderstood. Specifically, the attorney may not: 1. make a gift or transfer the donor’s property for the benefit of anyone other than the donor, unless the document otherwise provides, 2. act in his or her self-interest or in any way that presents a conflict of interest with the donor, 19 Sweatman Capacity at pp. 17-18. 20 For example, in the Powers of Attorney Acts of Alberta (s. 4), Saskatchewan (s. 4 ), and Manitoba (s.10(3)), any adult who has the capacity to understand the nature and effect of an enduring power of attorney may make one. However, British Columbia (s. 12) and Ontario (s. 8 (Substitute Decisions Act)) have more detailed requirements including that the donor appreciates that if the attorney does not manage the property prudently the value may decline and that the attorney could misuse the authority given to him or her. 21 From time to time, some will argue that that language “my attorney can do anything that I could do if I was present” is sufficient to permit any transaction without regard to the fiduciary duties. 11-20 Substitute Decision-makers for Financial Affairs 3. make a will or other testamentary disposition on behalf of the donor, 4. delegate his or her authority unless specified otherwise, or 5. perform acts that are personal to the donor, including acting as a director of a corporation. Given the seriousness and frequency of the breach of these duties, particularly the first three, a number of jurisdictions have specifically addressed both the duties and/or the prohibitions in the legislation. If a maker wishes to override the restrictions it must be in the document. Each of the restrictions are discussed below. 11.2.9.4 Gifts and Donations A number of jurisdictions provide specific conditions under which an attorney can make gifts to family members or a charity, transfer property to the attorney, and/or use the maker’s assets to support the maker’s dependants to whom he or she had a legal obligation to provide support. In the absence of this legislation, or a specific authorization in the power of attorney document, the common law applies and an attorney must only act for the benefit of the maker. Quebec Only: See articles 2138 and 1315 CCQ). 11.2.9.5 Acting in Self-interest or Conflict with the Donor An attorney has a duty to act in the maker’s interest and to not exercise the power of attorney for personal benefit. Breach of these duties is serious. Two case examples illustrate the consequences. The first is a 1921 case from the Saskatchewan Court of Appeal that went to the Supreme Court of Canada. In Elford v. Elford,22 the Supreme Court of Canada affirmed the Court of Appeal decision against a husband who used his wife’s power of attorney to transfer property into his name. In Burke Estate v. Burke Estate,23 the husband was granted a power of attorney by his wife. He used his wife’s funds to purchase Canada Savings Bonds in their names as joint tenants with right of survivorship. As a result, on her death, the funds went to the husband and not her estate. The court found that the husband held the funds for his wife and they formed part of her estate. Quebec Only: See articles 2138 and 2146 CCQ. 22 1 W.W.R. 341 (Sask. K.B.), revd 61 D.L.R. 40 (C.A.), affd 64 S.C.R. 125. 23 1994 CanLII 7442 (ON S.C.). 11-21 Substitute Decision-makers for Financial Affairs 11.2.9.6 Wills and Beneficiary Designations The prohibition on making wills is clear. However, beneficiary designations in life insurance policies and registered plans are another way to transfer assets on death. They are considered “will substitutes”. Generally, a beneficiary designation is a testamentary disposition and therefore it is outside the scope of authority for an attorney under an enduring power of attorney. However, what happens if the attorney wants to move a registered plan to another institution, or a RRSP matures and must be rolled into a RRIF? Both decisions require new account documentation and the beneficiary designation must be considered. One would expect that any beneficiary designations on the original plan should be carried forward to the new account. Failure to do this could undo a careful estate plan and/or the donor’s intentions. The law in this area is subject to some confusion and can be complex. Some jurisdictions have specifically addressed this issue to ensure that it is clear that an attorney can continue the designation. Subject to clear legislation governing what an attorney may do, an attorney should always seek legal advice prior to making changes of this nature. 11.2.9.7 Disposing of Gifts in Wills British Columbia, Manitoba, and Ontario: As noted in Chapter 7 at 7.8.6.2, Statutory Exceptions to Ademption – Sale by Substitute Decision-makers, these jurisdictions now provide that if a specific legacy is sold or gifted, the legatee may be entitled to the proceeds (or fair market value at the time of disposition). Each rule is subject to some exceptions. See Chapter 7 for details. 11.2.9.8 Common Law Only: Personal Acts and Delegation There are some actions that are personal to an individual that cannot be performed by an attorney under an enduring power of attorney. The following are examples of such personal acts: If the donor is elected to be a director of a corporation, the attorney may not step into the role and if the donor is incapable, a new director must be elected. If a donor held the office of an executor, trustee, or attorney before becoming incapable, the attorney does not have authority to assume those roles on behalf of the donor. The attorney must look to the will, trust, or power of attorney document to identify the named alternate. If the document is silent, one must look to legislation or common law for guidance on how to replace the incapable fiduciary. The prohibition on delegation is another example of a type of personal act and an attorney is not permitted to delegate the authority that has been granted to him or her 11-22 Substitute Decision-makers for Financial Affairs unless it is permitted in the document or under the governing legislation.24 Many jurisdictions address delegation. As with trustee delegation, most jurisdictions now permit delegation of investment decision-making powers. 11.2.9.9 Quebec Only: Personal Acts and Delegation Article 2140 CCQ requires the mandatary to carry out the mandate personally. However, if the interests of the mandator require it, the mandatary may appoint a third person to replace the mandatary where unforeseen circumstances prevent him or her from fulfilling the mandate and the mandatary is unable to inform the mandator in due time. However, article 2141 CCQ provides that the mandatary remains accountable for the third party’s actions. If the mandatary is authorized to appoint a third party, the mandatary’s liability is limited to the care taken in selection of third party and the instructions given. 11.2.10 Compensation 11.2.10.1 Common Law Only While the common law gives an agent a right to compensation, the compensation must be set out in the appointment or approved by the court.25 A number of statutes address compensation. Students are referred to their applicable legislation. Briefly: British Columbia, Saskatchewan, Yukon, the Northwest Territories, and Nunavut: Compensation must be authorized in the document or approved by the court. Alberta and Manitoba: The court must approve compensation. Ontario: Ontario is unique in that the prescribed fee schedule for property guardians also applies to attorneys. If an attorney takes compensation, he or she may be held to a higher standard of care in the management of the maker’s assets. This is specifically provided for in the legislation in Ontario and Manitoba. Note that as with trustees and personal representatives, all compensation is income to the attorney for tax purposes. 11.2.10.2 Quebec Only In the case of a protection mandate, remuneration must be authorized in the document. However, a trust company is entitled to remuneration.26 24 Sweatman Capacity at pp. 16-17. 25 Sweatman Capacity at p. 17. 26 Act respecting Trust Companies and Savings Companies, S.Q. c. S-29.01, s. 174. 11-23 Substitute Decision-makers for Financial Affairs 11.2.11 Record Keeping and Accounting Generally, an attorney must keep records of all transactions and be prepared to account for every transaction from the time the attorney started to act. While the maker is capable, the attorney must account to the maker. 11.2.11.1 Common Law Only Many jurisdictions establish specific requirements to ensure that if the maker is incapable, the duty to account continues. These jurisdictions will provide guidance on the type of information that can be requested and/or may require reporting to a third party. For example, in Manitoba, an attorney must provide an annual accounting to the person named in the power of attorney or, if no one is named, to the maker’s “nearest relative”. Whereas in British Columbia and Ontario there are regulations that set out what is required should an accounting be requested by those authorized to do so. 11.2.11.2 Quebec Only Currently, in Quebec there are no annual accounting obligations imposed on a mandatary unless the terms of the mandate impose such an obligation. Article 2169 CCQ provides that the mandatary has an obligation to make an annual report to a tutor or curator where the parallel regime is in place. The mandatary must also render an account at the end of his or her administration (art. 2184 CCQ). 11.2.12 Revocation by the Donor A maker may revoke a power of attorney at any time assuming the maker has the requisite capacity to do so. This rule is carried over into most legislation. Revocation can also result from a number of other events. Examples include: a new enduring power of attorney explicitly revokes all prior documents; a document or action revokes an existing document by its nature or according to legislation; or a new enduring power of attorney that, by legislation, automatically revokes prior documents unless specifically addressed.27 Some legislation also sets out the requirements for what is required to revoke an enduring power of attorney. For example, in addition to having the required capacity, a revocation may need to be in writing and meet certain formalities, including notice requirements. Quebec Only: If capable, the mandator may revoke the mandate (art. 2176). If the mandator is not capable, the Public Curator or any interested person may apply to a court for a revocation if the mandate is not faithfully performed or for any other serious reason (art. 2177). 27 For example, in Ontario, s. 12 of the Substitute Decisions Act provides that the power of attorney is revoked when a new one is made unless the grantor (donor) specifically provides that there shall be multiple powers of attorney. 11-24 Substitute Decision-makers for Financial Affairs 11.2.13 Termination Events 11.2.13.1 Common Law Only An enduring power of attorney will be terminated on the happening of a number of events. These include: the death of the donor, bankruptcy of the donor, or when a specific event identified in the document occurs. Events personal to the attorney may terminate the appointment. These include: resignation of the attorney (see 11.2.14 Resignation or Renunciation by Attorney) incapability of the attorney, or death of the attorney. Some jurisdictions have included a number of other events that will terminate an attorney’s authority. These may include the attorney’s bankruptcy and/or the separation or divorce of the attorney and donor. Many jurisdictions give the court specific authority to remove an attorney. If an attorney’s authority is terminated, the power of attorney is also terminated unless an alternate attorney is named, or the relevant jurisdiction provides a mechanism for replacing attorneys. Finally, if the court appoints a property guardian, an enduring power of attorney will be terminated. 11.2.13.2 Quebec Only In addition to revocation by the mandator or the court, and renunciation by the mandatary, article 2175 CCQ provides that the mandate will terminate on the death of either party, bankruptcy unless it was given under gratuitous title and, in some cases, the institution of protective supervision of either of the parties. 11.2.14 Resignation and Renunciation by Attorney Generally an attorney may resign his or her appointment by giving notice to the maker. However, if the maker is no longer capable, a number of provinces have added safeguards to ensure the maker is not abandoned. For example, in some provinces, where the attorney has accepted the appointment and/or started to act, the attorney is not permitted to renounce his or her appointment without permission from the court. Others have requirements that notice be provided to certain parties in writing. Quebec Only: See article 2178 CCQ for details. 11-25 Substitute Decision-makers for Financial Affairs 11.2.15 Dealing with Assets Outside the Jurisdiction Generally, a power of attorney is governed by provincial law where the donor is resident. If the donor has assets outside the province, particularly real property, it may not be possible or practical to deal with those assets with the power of attorney created in the donor’s province of residence. A power of attorney prepared in accordance with the local laws where the property is located may be required or preferred, especially if the property is located outside Canada.28 CAUTION: Even if a power of attorney is made in another jurisdiction, care must be taken, as with a will, to not unintentionally revoke the local power of attorney. It should be prepared by a lawyer (or in Quebec, by a notary) who practices law in that jurisdiction. British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Yukon, Northwest Territories, and Nunavut: These jurisdictions make specific provision for recognizing powers of attorney made in other jurisdictions. Most of these recognize enduring powers of attorney made in other jurisdictions if they are valid in the jurisdiction where they were made and specify that they are enduring powers of attorney. New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island: The legislation in these jurisdictions is silent on recognizing enduring powers of attorney from other jurisdictions. All: For an enduring power of attorney from another jurisdiction to be valid in Quebec, it is not absolutely clear that homologation is imperative, given the terms of article 3116 CCQ. The law applicable to the requirement for homologation could be the law of the domicile of the grantor at the time of execution or the law of the place where the attorney will act, as for example, the situs of the immovable property. (See 11.2.6 When Does an Enduring Power of Attorney Come into Effect? for a discussion of the homologation process.) The better view is that homologation of an enduring power of attorney to be used for assets in Quebec is not required if that requirement is not prescribed by the governing law of the enduring power of attorney. While it is the practice of some notaries in Quebec to require homologation of a foreign enduring power of attorney for transactions involving immovable property by virtue of the application of the law of the situs of the immovable, being Quebec law, there does not appear to be any valid justification in law to extend this practice or requirement of homologation to transactions involving movable property. The following chart (see Figure 11.1) provides a quick reference with respect to the validity of various instruments both under the law of Quebec and foreign law depending on whether the mandator is capable or incapable. 28 The Uniform Law Conference of Canada has passed a Uniform Recognition of Substitute Decision Making Act. The Uniform Law Conference in the United States has passed similar legislation. As jurisdictions implement this model legislation, it will become easier for powers of attorney, property guardians and proxies to be recognized between jurisdictions. However, it is unclear if or when the model law will be adopted. 11-26 Substitute Decision-makers for Financial Affairs Figure 11.1: Quebec Only: Recognition of Foreign Enduring Power of Attorneys Proper Capable Incapable Law Type of Instrument Mandator Mandator Validity Yes Yes Quebec POA (specific or general) Yes No Mandate Yes No Yes Yes, if homologated No, if not homologated Combined power of Yes Yes, for power of attorney attorney and mandate No, for mandate Yes No, for power of attorney, subject to art. 2167.1 CCQ Yes, for mandate if homologated No, for mandate if not homologated Foreign Power of Attorney Yes Yes Yes Obtain opinion from local counsel Enduring Power of Yes Yes Attorney Yes Obtain opinion from local counsel 11.2.16 Using a Power of Attorney to Deal with Real Property Many jurisdictions have specific requirements with respect to the execution or validation of a power of attorney used to deal with real property.29 In addition, some may require a power of attorney to be renewed unless it is an enduring power of attorney. 11.3 GUARDIANSHIP 11.3.1 Introduction If an adult is not capable to make his or her financial decisions and an enduring power of attorney has not been made, family members and others, including corporate trustees and the province’s Public Guardian and Trustee (in Quebec, the Public Curator), may apply to be the adult’s property guardian. Although responsibilities are similar, the terminology for this role varies across the country and includes guardian of property, committee of estate, and trustee. Quebec Only: The terminology generally used for when a guardian is appointed is “protective supervision of persons of full age” and specifically this person administers protective supervision. There are three kinds of protective supervision and three names. Try this for a 29 Alberta, Ontario, Quebec, and Newfoundland and Labrador have no specific requirements. 11-27 Substitute Decision-makers for Financial Affairs rewrite: “There are three types of protective supervision of persons of full age. The first two are tutorship, where the scope of the tutor’s powers are limited in some way, and curatorship, which is a broad and more general authority. Although less common, the court might also appoint an advisor to assist with the decision making.30” See Chapter 2 at Figure 2.5 Substitute Decision-makers by Jurisdiction, for the terminology in your province. CAUTIONS: Guardians can also be appointed to make personal care and/or health-care decisions, so it is important to distinguish the scope of a guardian’s authority. Guardian, as used in this Chapter, does not include a guardian of a minor (See Chapter 7 at 7.16.2 Legal Representatives for Minors, for discussion of minors.) The role and responsibility of a court-appointed guardian is similar to an attorney under an enduring power of attorney. The duties and powers are similar, but additional requirements and restrictions may be imposed. The sections that follow identify some of the key features of property guardianship. Quebec Only: The rules applicable to tutorship for minors (art. 208 & ff. CCQ) apply as adapted to tutorship for persons of full age (art. 287 CCQ). 11.3.2 Who Can be Appointed? Any adult, a corporate trustee, or the Public Guardian and Trustee (in Quebec, the Public Curator) may be appointed by the court to act as a guardian. Quebec Only: See Chapter 7, Estate Beneficiaries, on concurrent jurisdiction of a Quebec notary in non-contentious matters. The court will often consider the closest next of kin before appointing a third party such as a corporate trustee or the Public Guardian and Trustee. When more distant or unrelated parties are applying, the court will need evidence as to why closer relatives should not be appointed and/or why the applicant is an appropriate choice. 11.3.3 Requirements for a Court Appointment An application for guardianship will be subject to the requirements set out in the relevant provincial legislation. The legislation may set out who has priority in making an application for guardianship, similar to the priority for appointing an administrator of an estate. 30 The rules governing advisors are beyond the scope of this course. 11-28 Substitute Decision-makers for Financial Affairs The application will require evidence of the adult’s incapability to manage financial affairs. This may be provided through affidavits from a medical practitioner or by an assessment of incapability report depending on the jurisdiction. Quebec Only: The assessments to prove incapacity are called medical and psychosocial assessments. The applicant will likely need to state the relationship to the adult and provide reasons for why the applicant should be appointed. Other next of kin may need to be identified and the adult’s assets and liabilities may need to be disclosed so that the court can assess the applicant’s suitability for the responsibilities. Some jurisdictions also require a management plan. The consent of certain relatives or third parties is also often required. The Public Guardian and Trustee in many jurisdictions also reviews the application and provides comments to the court. Quebec Only: The Public Curator is included as a party to the proceedings. See also articles 266, 268 & ff. CCQ, and articles 303-311 CCP for applications before the court and articles 312-320 CCP for applications before a notary. When the court appoints the property guardian, a variety of conditions might be imposed including: a restriction on dealing with certain assets. requirement to post a bond31 or other security (not required for corporate trustees or the Public Guardian and Trustee), and if not prescribed by legislation, frequency for providing an accounting to the court or the Public Guardian and Trustee. Note, similar to a power of attorney, a property guardian does not take title to the adult’s property. 11.3.4 Duties and Powers A court-appointed guardian’s duties and powers are similar to those of a trustee and an attorney. In some jurisdictions, the powers are broad unless limited by the court. In other jurisdictions the court will list the scope of authority and decision-making powers. However, some duties are addressed in property guardianship legislation and can only be altered by a court order. For example: The property guardian’s duty is to the adult. Subject to legislative powers to consider a spouse or other dependants, the guardian may be restricted in his or her power to assist 31 A bond (or surety bone) is a type of insurance to protect the adult from the improper actions of the guardian. A premium is paid from the adult’s estate. 11-29 Substitute Decision-makers for Financial Affairs dependants. In addition, unlike a trust, there is no duty to preserve capital for potential beneficiaries of the donor’s estate. Quebec Only: A tutor has the powers of simple administration and preserves the property (art. 286 CCQ). A curator has full administrative powers but may only make presumed sound investments (art. 282 CCQ). Depending on jurisdiction, the property guardian must account to the Public Guardian and Trustee, the court or other designated party (in Quebec, arts. 246 to 249 CCQ). If the property guardian is an individual, he or she may be required to post security (usually a bond). Alternatively, the court may impose restrictions on the guardian’s ability to deal with property or transfer accounts. 11.3.5 Oversight or Monitoring When a guardian is appointed only the court can supervise the guardian Quebec Only: See article 278 CCQ for periodic review of protective supervision. This role may be fulfilled by the Public Guardian and Trustee (in Quebec, by the Public Curator). Periodic accountings will be required. Similar to a trustee, the guardian must list all assets and record all dispositions and purchases. Asset values at the beginning of the period and end of period must be provided. All income and expenses must also be recorded. 11.3.6 Compensation A guardian’s compensation is established by a court order or guided by legislation. It usually follows the rules for trustee compensation as found in the relevant trustee act. Court approval is required unless the Public Guardian and Trustee is authorized to approve the fees or a prescribed fee scale is in place. See Chapter 9 at Figure 9.1 Legislation for Compensation of Executors, Trustees, and Property Guardians, for the relevant legislation and fee scales. NOTE: As with trustee and personal representative fees, any fees earned by a guardian are taxable income. Quebec Only: A tutor or curator is entitled to request remuneration from the tutorship council and the court can approve the amount, which is usually an hourly rate. 11.3.7 Inter-jurisdictional Issues Similar to situations where a grant of probate or an enduring power of attorney might be used in another jurisdiction, it may be necessary to obtain legal authority through the local courts to deal with an incapable adult’s property, especially if it is outside Canada. Most jurisdictions in Canada will accept court orders from another Canadian jurisdiction. It is also advisable to confirm with local counsel in the other jurisdiction from which the court order was rendered. 11-30 Substitute Decision-makers for Financial Affairs 11.4 ENDURING POWERS OF ATTORNEY VERSUS PROPERTY GUARDIANS (IN QUEBEC: PROTECTIVE SUPERVISION) Although enduring powers of attorney have many advantages, they are powerful documents. Depending on the jurisdiction, there may or may not be many legislated safeguards to help protect the adult’s assets. Property guardians, on the other hand, are subject to a significant level of oversight as has been noted in this Chapter. If the donor does not have a trusted person in his or her life, a property guardian, if and when needed, may be a more cautious option. Figure 11.2 is a summary that highlights the differences between the two options reviewed in this Chapter. Figure 11.2: Comparing Enduring Power of Attorney and Court Ordered Property Guardian Considerations Enduring Power of Attorney Court-ordered Property Guardian Choice The adult chooses who will act, whether The court decides based on who makes the there should be more than one, and can application and evidence provided when provide for alternates. there is a dispute. Cost to appoint Will depend on the province and the level Can cost $5000 or more. Includes legal of detail included in the document. fees, assessment costs. Assessment Unless the enduring power of attorney Requirements vary from two medical process requires an assessment, no assessment is physician opinions to a prescribed required for the attorney to start to act. assessment process. E.g. Quebec requires a The donor may put an informal process in medical and a psychosocial assessment. place that does not require a formal assessment. Quebec Only: Quebec requires a court process, including assessments, to prove the adult’s incapability. When authority Unless the enduring power of attorney is a Authority cannot be used until the court is effective springing power it can be used appoints the property guardian. This can immediately, and it can be used to assist in take a number of months during which some areas of decision–making. time financial matters may not be dealt with, including support to dependants. Autonomy A donor retains some autonomy in A declaration of incapability takes away decision–making. the adult’s legal right to make financial decisions (subject to limited orders where available in some jurisdictions). Scope of The donor decides the limits and/or The legislation sets the boundaries and the authority exceptions to the common law and court may limit the property guardian’s statutory duties. authority for certain assets (e.g. sale of a house). Removal Donor can terminate the appointment Court application is required to terminate while the donor is competent. The court the order. can also remove the attorney in some 11-31 Substitute Decision-makers for Financial Affairs Considerations Enduring Power of Attorney Court-ordered Property Guardian circumstances. Accounting Generally less onerous; donor can include Legislated requirements that may require requirements. court process. Quebec Only: Annual accounting is rendered to the Public Curator. Replacement The donor can provide for alternates. A court order is required. Note: The Public Guardian and Trustee may be the default property guardian if the property guardian dies or becomes incapable. Quebec Only: Default is the Public Curator. Termination A donor can terminate the power of A court order is required unless the adult attorney while the donor is capable; dies. legislation sets other termination events. 11.5 COMMON LAW ONLY: STATUTORY GUARDIANSHIP 11.5.1 What is Statutory Guardianship For purposes of this course, the term statutory guardianship refers to the process whereby an adult is declared incapable without a court process and the province’s Public Guardian and Trustee becomes the property guardian. Each province also has its own laws governing how a certificate of incapability is issued and how it can be terminated. Historically, these laws have been criticized for their lack of due process. Some provinces have introduced legislation that ensures a certificate of incapability will not be issued without due process.32 The details of this process are outside the scope of this course. A statutory property guardian is generally subject to the same duties and responsibilities of a property guardian. 11.5.2 Ontario Only: Rules for Replacing a Statutory Property Guardian Ontario is the only province at the date of writing that provides a mechanism for transfer of statutory property guardianship to a third party. The details on how to apply and the requirements are outside the scope of this course. Students are referred to s. 17 of the Substitute Decisions Act for more information. 32 See the Ontario Substitute Decision Act, 1992, S.O. 1992, c. 30, and British Columbia’s Adult Guardianship Act, R.S.B.C. 1996, c. 6, Part 2.1. 11-32

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